Illinois has been declared a disaster state due to the COVID-19 pandemic. Illinois small and mid-sized businesses are now qualified to apply for SBA Economic Injury Disaster Loans up to $2 million directly through the Small Business Administration.
These loans are designed to be working capital loans used to pay ongoing business expenses. For example, payroll, accounts payable, fixed debts and ongoing bills that could have been paid if the disaster had not occurred are valid uses for the loan. Re-financing existing debt is not.
Basic loan terms include:
- Eligible entities may qualify for loans up to $2 million.
- Interest rates for this disaster are 3.75% for small businesses and 2.75% for not-for-profit organizations.
- Loan term can extend up to 30 years.
- The first payment is deferred for one year.
- There is no cost to apply and no obligation to take the loan, if offered.
The SBA’s stated goal is to have the funds in a successful applicant’s hands within four weeks of receiving a completed application.
In addition to verifying eligibility requirements, the SBA will review the business’ credit history and ability to repay the loan. It will seek collateral for loans in excess of $25,000; however, lack of collateral is not in itself a reason to deny the loan. Personal guarantees will also be required.
How to Apply
Apply directly to SBA’s Disaster Assistance Program and select “Economic Injury” as the reason you are seeking a loan. You will need to provide the following forms:
- SBA loan application (SBA Form 5);
- Tax Information Authorization (IRS Form 4506-T) for the applicant, principals and affiliates;
- Complete copies of the most recent Federal income tax return for the business;
- Financial statements for 2019, if the 2019 business tax return has not been filed.
- Year-to-date financial statements since last year end;
- Schedule of Liabilities (SBA Form 2202);
- Personal Financial Statement (SBA Form 413); and
- Other information, as requested.
It is important to have all of your loan documentation ready when you begin the application. We suggest that you download the forms and gather the necessary information before going on the system to complete and submit the application.
Currently, there is heavy traffic on the website and loans are handled on a first-come, first-served basis; so do not delay.
We will keep you posted as new developments occur. In the meantime, we will continue to work remotely to assist our clients during this crisis.
Related Read: Tax Credit for Small and Mid-Size Businesses Providing Coronavirus-Related Paid Leave
If you have questions or concerns regarding this Client Alert, please contact Frank Washelesky at [email protected] or your ORBA advisor.
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