Effective March 20, 2020 Tennessee is a declared state for Coronavirus (COVID-19) disaster assistance. If your business has been impacted, you can now apply at no cost for a disaster assistance loan.
What does this mean for small business owners across Tennessee? It means you can apply to the SBA for an Economic Injury Disaster Loan up to $2 million. While terms are negotiated on a case-by-case basis, interest rates are generally 3.75% (small business) and 2.75% (nonprofit) with repayment periods up to 30 years.
Impacted businesses can learn more by visiting SBA’s Economic Injury Disaster Loan site.
Note: Due to high applicant volumes, consider submitting applications in off-peak hours: 7pm – 7am.
SBA ECONOMIC INJURY | DEFINITIONS & ANALYSIS
ECONOMIC INJURY: Businesses can only seek assistance for economic injury (not physical damage) as a result of the coronavirus/COVID-19 epidemic. Substantial economic injury occurs when a business concern is unable to meet its obligations as they mature or to pay its ordinary and necessary operating expenses.
ESTABLISHING INJURY: Establishing economic injury is a comparison between the financial information from the period in the prior year to the injury period of the current year – this period must be associated to the coronavirus/COVID-19 pandemic and cannot be attributed to a downturn in local economy or other unrelated issues. Examples include:
- Employees are unable to work;
- Major conferences/events cancelled from which the business received revenues;
- Substantial reduction in customers due to social distancing or because local or state officials are asking or ordering businesses to temporarily close or reduce services.
DURATION OF INJURY: The business should consider how long it will take for things to normalize. If it’s three months, the loan analysis would show the financial data for the same three months of last year and the anticipated financial data for the same period this year.
GENERAL USES: The loans are not intended to replace lost sales or profits, rather they are intended to pay fixed debts, payroll, accounts payable, and other expenses that could have been paid had the coronavirus/COVID-19 pandemic not occurred.
SBA ANALYSIS: A drop in sales, the length of the impact, the type of business and typical business cycle of the industry, provides SBA loan officers with the requisite data needed to determine if the economic injury is considered substantial.
SBA EIDL LOANS | AN OVERVIEW
AMOUNT: Up to $2 million in assistance per small business to provide vital economic support and overcome the temporary loss of revenue.
USES: Fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.
INTEREST RATES: 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
TERM: Up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
REPAYMENT: Right now, the SBA is indicating deferment of payment for the first year (not yet confirmed).
EIDL BORROWER CHARACTERISTICS
ECONOMIC IMPACT: Demonstrable negative impact sales compared to this time last year.
CREDIT REQUIREMENTS: At this time, general credit requirements will be relaxed.
REASONABLE CREDIT SCORE: You must have a reasonable credit score or be able to explain a low credit rating (i.e. medical or family).
CASH FLOW PROJECTIONS: Must have a very basic cash flow projection to show your likelihood of repaying the loan following the disaster (completed within application).
GOOD STANDING: Must be current on other loans (including SBA Loans) and IRS payments. Payment plans with the IRS and banks may be available to reinstate “current” status and apply for an EIDL.
SBA APPLICATION TIPS
- Only submit complete and accurate loan packages.
- Only submit electronically – submitting a paper application will take longer.
- Only submit one request – be complete in your request for funding. Applying a second time for additional money will be difficult.
- Plan to be able to print, sign, and scan all necessary documents.
- Plan to upload your most recent tax returns.
USES: EIDL loans support general working capital needs. They do not support expansion or debt consolidation.
SBA PRODUCT: Apply online with the SBA, this process is not completed through your bank or credit union. Filling out the application completely is key to successful processing.
COLLATERAL REQUIREMENTS: Requests over $25,000 will require collateral – as available – at this time, but collateral requirements are not firm, so do not let this keep you from applying.
TIMELINE: Underwriting will take 2-3 weeks for underwriting and then another 7-10 days for documentation & disbursement – with a full and complete application.
CONTACTING THE SBA
SBA CUSTOMER SERVICE: 1-800-659-2955
SBA DISASTER WEBSITE: https://disasterloan.sba.gov/ela
CONTACTING PATHWAY LENDING
RAPID RECOVERY LOANS: We currently offer Rapid Recovery Loans up to $50,000 for small businesses impacted by the coronavirus/COVID-19 pandemic. With a quick turn time, these loans are designed to work with the SBA disaster loans, providing a bridge until those funds are available. Please reach out if this could be of assistance. Amount of Rapid Recovery Loan subject to credit approval.
APPLY ONLINE: https://www.pathwaylending.org/loans-small-business/
QUESTIONS: While our offices are temporarily closed, we are open for business. Contact us at (615) 425-7171 for more information or assistance with emergency funding during this time.
At Pathway Lending, we are dedicated to helping you and your business succeed. Please know that as this crisis continues to evolve, we are here for you. Do not hesitate to reach out to our staff of lenders and business advisers to discuss how we can help you during this time.