Small Business Administration Disaster Loans Due to Coronavirus’ Impact

Posted on March 19, 2020

SBA Disaster Loans as a Tool for Obtaining Liquidity

Note: The program is continuing to evolve and this report reflects the information available as of March 23, 2020.

We know these are unprecedented times in the food distribution industry. Many difficult decisions are being contemplated, and paramount among those is ensuring our companies have ample financial resources. One such tool that may help companies with liquidity are U.S. Small Business Administration (SBA) Disaster Business Loans (specifically Economic Injury Disaster Loans), which have been made available to businesses that experience substantial economic loss due to the impact of Coronavirus. The Economic Injury Disaster Loan option is available only after the small business cannot obtain credit elsewhere.

Key Features of Small Business Administration Disaster Loans

• The SBA is suggesting that the time to get funding approximates 40 days.
• If approved, you are not committed to accept the loan should better alternatives become available in the interim.
• Loans are available for states/counties that have officially declared disasters related to COVID-19. See if your state/county has been declared a disaster area.
  *Note that these declarations are changing on a rapid basis. If your state/county is not declared today, it may be in the near future.
• Principal amounts up to $2 million per borrower
• Repayment terms are 30 years
• Interest rates on loans for businesses will be 3.75%

In order to qualify for these loans (assuming your state/county has been declared a disaster area), a business must follow a process and complete a number of forms.

Process for Applying for a Small Business Administration Disaster Loan

• • Read a summary of the process, as prepared by the SBA
  • In prior years, the SBA has required a letter from a bank declining financing. This does not seem to be required currently. The forms that must be completed can all be found here (see the section entitled “SBA Disaster Business Loan Application”) ·
  • Cash flow projections do not appear to be needed for this program – instead, the historical operating expenses of the company appear to dictate the amount that may ultimately be funded. 
  • You may also apply online

  In the case of the coronavirus, the loans will not be used to fund uninsured property damage as was the case with other disasters such as Katrina, but instead will be used to fund losses and working capital needs incurred as a result of the coronavirus. We believe that SBA Form 1368 will be a key form that will be used to support the extent of financing requested from SBA, as it requires information on gross sales for each month during the previous three years.

We are committed to help you and your business. We will keep you informed of new financial tools as they become available, including the programs that come out of the legislation now being debated in Washington – If you would like to talk with us about your business, please know that we are here to listen and offer constructive advice.

As advisors to the food distribution industry for over 15 years, we are here to help. Together, we will get through these uncertain times.

Bill Beattie                                                                           Matt Austin

Email: bbeattie@keiteradvisors.com                Email: maustin@keiteradvisors.com

Phone: 804.565.6018                                                        Phone: 804.433.4184