Important Updates to SBA Loan Program

A core mission of the Small Business Administration (“SBA”) is to “assist. . . in the economic recovery of communities after disasters.”  Even before the COVID-19 pandemic, SBA already offered a disaster loan program that included low interest, sometimes un-secured, loans for businesses suffering economic injury from a declared disaster.

On October 16, 2017 (again well before the COVID-19 pandemic), SBA announced the Express Bridge Loan (“EBL”) Pilot Program, which was designed to supplement the Agency’s direct disaster loan capabilities by offering expedited SBA-guaranteed bridge loan financing on an emergency basis in amounts up to $25,000 for disaster-related purposes to small businesses located in communities affected by Presidentially-declared disasters while those small businesses apply for and await long-term financing.

Now, effective March 25, 2020, SBA expanded the EBL program eligibility to include small businesses nationwide adversely impacted under the COVID-19 Emergency Declaration issued by President Trump on March 13, 2020 (“COVID-19 Emergency Declaration”). Because the COVID-19 Emergency Declaration covers all states, territories, and the District of Columbia, eligible small businesses under the EBL Pilot Program include small businesses located in any state, territory and the District of Columbia that have been adversely impacted by the COVID-19 emergency. The notice also stated that all references to disasters in the EBL Pilot Program requirements will include the COVID-19 emergency. In the same notice, SBA extended the term of the EBL Pilot Program through March 13, 2021.

Under the EBL program, loans are subject to the following criteria:

  • Business located within a Presidential disaster area: The applicant must show it operates a business located, as of the date of the applicable disaster, in a county declared as a disaster area under a Presidential Disaster Declaration or in a contiguous county.  
  • Eligibility period: For COVID-19 Emergency Declaration loans, Lenders may obtain SBA loan numbers for EBL loans through March 13, 2021. 
  • The maximum EBL loan amount is $25,000. 
  • The EBL loan must be structured as a term loan (revolving lines of credit are not permitted) and the maximum EBL loan term is 7 years. 
  • The Lender may require the EBL borrower to pay the EBL loan in part or in full if the borrower is approved for long-term disaster financing (including an SBA Direct Disaster loan) that allows loan proceeds to be used for EBL loan reimbursement.  
  • For Presidential Disaster Declarations, EBL loan proceeds must be used exclusively to support the survival and/or reopening of the small business within the eligible (Disaster-affected) area of its original operation. 
  • For the COVID-19 Emergency Declaration, EBL loan proceeds must be disbursed as working capital. 

It should be noted that the expansion of the SBA EBL program is distinct from the currently pending “Coronavirus Aid, Relief and Economic Security (“CARES”) Act, passed by the U.S. Senate on March 25 and passed by the House just today.  It is anticipated that the CARES Act will create a new SBA program for “Small Business Interruption Loan” to provide loans of up to $10 million per business, and that any portion of that loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and existing debt could be forgiven, provided workers stay employed through the end of June.  We will provide further updates on the SBA aspects of the CARES Act in a future update.

Can AWD LAW help me?

AWD LAW is here to answer your questions. Not only are we trying to get you information like what is presented here, so that you know what options the SBA is making available. We also have been monitoring the SBA loan application website, which has suffered from outages in recent days, and we are in touch with banks that will play an important role in some loan programs. The banks, it is fair to say, are scrambling like the rest of us to catch up and keep up with quickly changing information. It is not enough that the SBA has programs that might help you. We understand you must be able to navigate the whole process up to placing funds in your account. Please do not hesitate to reach out. Send us an email [email protected] or call us at (928) 774-1478.

AWD LAW® is an expert legal team with specialties in Business Law and a wide array of other legal matters.