Small Business Administration Loans Available to Support Providers through COVID-19 Pandemic

Regulation | April 03, 2020 | by

Loans from SBA may be able to help support members experiencing financial difficulty due to COVID-19.

This article has updated from the original version published on March 20.

New loans from the federal government became available to small organizations following the COVID-19 national emergency declaration. On March 19, the U.S. Small Business Administration (SBA) began posting eligible areas across the country where small entities can apply for economic injury loans due to the COVID-19 pandemic.

Nonprofit organizations are eligible apply for these SBA loans and aging services providers may be able to access these loans to make ends meet during this time. These loans may be particularly helpful to community-based providers, such as adult day services providers, who close during the COVID-19 pandemic. This article provides additional information on the loans, including details about how the loans are set up, where organizations are eligible to apply and steps on completing a loan application.

What are the details of the SBA loans?

Like other loans, these SBA loans will vary from one recipient to another. The official title of the SBA loans are economic injury disaster loans. The below includes some parameters SBA provides on its website.

Terms: Per SBA, the Administration “offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.”

Interest Rates: Interest rates for SBA economic injury loans depend on the classification of the applying organization. For nonprofit organizations, including nonprofit aging services providers, the interest rate is generally 2.75%.

Amount: Per SBA, “The law limits economic injury disaster loans to $2,000,000 for alleviating economic injury caused by the disaster. The actual amount of each loan is limited to the economic injury determined by SBA, less business interruption insurance and other recoveries up to the administrative lending limit. SBA also considers potential contributions that are available from the business and/or its owner(s) or affiliates. If a business is a major source of employment, SBA has the authority to waive the $2,000,000 statutory limit.”

Refinancing other debt: Economic injury disaster loans cannot be used to refinance long term debts.

Credit Requirements: Applicants for SBA loans must have a credit history “acceptable to SBA” (no exact threshold is provided), must show the ability to repay the loan and must provide collateral. Per SBA, “Collateral is required for all economic injury disaster loans over $25,000. SBA takes real estate as collateral when it is available. SBA will not decline a loan for lack of collateral, but SBA will require the borrower to pledge collateral that is available.”

How can nonprofit aging services providers apply for loans?

Organizations interest in applying for an SBA economic injury disaster loan should visit the SBA web page. As of March 20, the web page is experiencing heavy traffic and it may take multiple attempts to successfully access the page. The deadline to apply for loans varies by state, but generally are not before December 2020.

Applicants must complete a loan application form, a form requesting a tax return transcript from the IRS, a schedule of liabilities form and recent tax returns. For reference and to help prepare members considering a loan application, links to PDFs of aforementioned forms are included below. Members should note that the SBA loan application is web-based so they don’t need to fill out the PDFs in advance.

Next Steps

LeadingAge will continue to monitor SBA loan opportunities and other potential sources of funding for members experiencing financial difficulty as a result of the COVID-19 pandemic. We will update and share our COVID-19 resource page as more information becomes available.

Additional Resources

You may also want to check out this article from our Silver Partner CLA which includes additional information on these loans and a comparison chart of the two programs.