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Here's how to get the new federal loans intended to help small businesses survive the coronavirus shutdowns

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Help from the Sonoma County Economic Development Board

sonomaedb.org/Business-Assistance/Business-Assistance-Coronavirus

Lauren Cartwright, business retention and expansion program manager, 707-565-7298, lauren.cartwright@sonoma-county.org

Marcos Suarez, business diversity program manager, 707-565-6402, marcos.suarez@sonoma-county.org

The U.S. Small Business Administration has announced changes to its loan policies making it easier for firms and private nonprofits to have access to low-interest economic injury and disaster loans in the wake of the coronavirus pandemic and mandated shutdowns.

SBA Administrator Jovita Carranza said these loans, up to $2 million with payments spread over 30 years, are to “help businesses impacted by COVID-19 containment measures meet financial obligations and operating expenses which otherwise could have been met had this disaster not occurred.”

Businesses financially impacted as a direct result of the coronavirus since Jan. 31 may qualify for these loans. The deadline to apply for an economic injury and disaster loan is Dec. 16.

SBA disaster loans are available for small businesses, small agricultural cooperatives and most nonprofits in declared disaster areas. Small businesses are defined as those with $750,000 to $38.5 million in annual revenue with fewer than 1,000 to 1,500 employees – which can vary by industries.

These SBA loans can be used for working capital, to pay fixed debts, payroll, accounts payable, inventory and employee sick leave.

Other bills that cannot be paid due to the disaster’s impact on funds include refinancing debts prior to the disaster event, to make payments on other loans from another federal agency or the SBA, to pay tax penalties or non-tax criminal/civil fines, to repair physical damage, or to pay dividends or other disbursements to owners or partners except as related to their performance of services for the business, according to the National Law Review.

Burl Kelton, public affairs specialist for California’s SBA Disaster Center in Citrus Heights, said application procedures have been streamlined to help expedite the loan review and approval process, while also reducing the number of documents applicants need to provide up front. All applicant calls go to SBA’s Buffalo, New York, call center in the East or SBA’s Citrus Heights center in the West.

He said the loan process does not begin until applications are submitted, so it is vital to file as soon as possible. The loan approval cycle in the past typically took about two weeks (10 to 14 days) if an applicant has all of the information needed. Due to increased volumes, it could take up to eight weeks in some cases.

3 ways to apply for SBA economic injury loans

There are three ways to apply for an SBA loan. Apply online (disasterloan.sba.gov/ela or ask questions via DisasterCustomerService@sba.gov), apply in person at a disaster center or apply by mail. Call the SBA Customer Service Center at 800-659-2955.

• Disaster loans can be obtained directly through the SBA without first going through a local bank. However, given what could be a longer SBA processing time due to the volume of applicants, some small business operators may consider applying for a bridge loan from a local bank to cover expenses until the SBA loan is approved and funds are received.

• Collateral is no longer required on SBA disaster loans up to $25,000. However, collateral must be provided for loans from $25,000 to $2 million after such loans are processed. Collateral can include real property, machinery and equipment as well as inventory.

• The disaster loan interest rate for businesses is 3.75% and 2.75% for private nonprofits.

• Disaster loans can now be processed without initially providing IRS tax records, ownership records, debt schedules as well as income and expenses, but these records will be required at a later date, determined by loan officers on a case by case basis.

Help from the Sonoma County Economic Development Board

sonomaedb.org/Business-Assistance/Business-Assistance-Coronavirus

Lauren Cartwright, business retention and expansion program manager, 707-565-7298, lauren.cartwright@sonoma-county.org

Marcos Suarez, business diversity program manager, 707-565-6402, marcos.suarez@sonoma-county.org

• All loans are for terms up to 30 years, with some adjustments made for cash flows. There is no penalty for early repayment.

Help in two phases

Kelton said the SBA is looking at helping small businesses receive funds in two phases. Phase I looks at the working capital an applicant will need for the next six months of operations, not to exceed $500,000. Phase II will look closely at a business’s financial records to see if additional funds may be needed later.

• Applicants should be prepared to provide a forecast of expenses extending six months into the future.

• The SBA is also prepared to make future loan adjustments, including both increases and decreases, if the applicant later determines he or she is facing additional costs not originally anticipated, or lower costs than expected.

“We at the SBA underwrite, fund and service all of our disaster loans from end to end, in accord with provisions of the Stafford Disaster Relief and Emergency Assistance Act of 1988. If Congress passes an economic assistance bill, it will likely be a separate program from what the SBA is doing.”

SBA cannot duplicate money a small business can receive from other sources, such as money for survivors from private insurance and/or FEMA, etc. However, there is an opportunity to adjust the loan if more funds are needed due to additional losses or unforeseen changes.

For example, if the borrower submits costs or losses not included in the initial loan calculation, the SBA can review and possibly increase the loan if there is eligibility for an increase within the statutory limit.

He said SBA is bringing in more workers to handle the call lines and to process applications, while striving to maintain social distancing.

“Almost everything is virtual with no physical locations. We are also adding local attorneys, legal consultants, those with experience as loan officers as well as some FEMA reserve personnel. Most will work from home with access to necessary equipment and technology to connect to each other and our database.”

Previous loan payments deferred

SBA Administrator Carranza, announced on March 23 that if a business is still paying on an existing SBA loan for previous disasters, such as the wildfires, payments on these loans are deferred until Dec. 31, 2020. This is an automatic deferment. Borrowers of such home and business loans don’t have to contact the SBA to request it. (http://www.sba.gov)

“The actions we are taking include updating the criteria on states and territories for requesting disaster assistance loans for small businesses impacted by the Coronavirus so they can now apply for economic injury loans, and also for changing the terms of new economic injury loans to allow for one-year deferments,” Carranza said.

First payments on new COVID-19 disaster loans can be deferred to the 12th month after the loan note is signed. This deferment is also automatic and stated in the loan agreement. As appropriate, servicing and disbursements continue during this time.

North Bay help with the SBA process

Locally, there are other agencies that can help small businesses navigate the SBA financial assistance process as well as guidance for business planning and development.

Funded in part through a cooperative agreement with the U.S Small Business Administration, the Napa-Sonoma Small Business Development Center (napasonomasbdc.org) is a nonprofit organization that provides expert no-cost support by phone and email as well as through webinars.

SBDC offices are located at Napa Valley Community College (707-256-7250) and in Sonoma County at 141 Stony Circle, Suite 110, in Santa Rosa (707-595-0060). The SBDC provides a wide range of services including loan application coaching and financial projections and budgeting.

According to SBDC Director Mary Cervantes, “We have a long list of people to call back, including old clients and new businesses, and we’re talking to people on a first come, first served basis. We currently have 50 businesses seeking SBA disaster injury loans – a number that changes by the minute. Most of these are restaurants worried about being able to stay in business, as well as small proprietors, graphic designers and many others.”

She said some clients are looking for bridge loans through local lenders and shopping for the best interest rates. “Everyone is waiting to see what Washington (Congress) will do to keep them afloat. There is a lot of misinformation out there. Some entrepreneurs erroneously believe SBA loans are grants. We have 22 advisers and are trying to build our capacity to keep up with demand. We’re all in the same boat.”

Ann Johnson-Stromberg, associate state director with the Norcal Small Business Development Lead Center (norcalsbdc.org, 707-826-3919) located on the Humboldt State University campus in Arcata, said SBDC has a total of 18 centers covering a 36-county territory.

“We offer personalized one-on-one advising. Our primary purpose is to enable small businesses to access the financial and other resources they need, especially at critical and challenging times such as these. Our services are free. Nothing related to our assistance for COVID-19 economic injury relief has costs.”

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