Small Business Administration offers local small businesses, nonprofits with low-interest, deferred payment working capital loans
By Reggie Ellis
FRESNO – The federal government is offering low-interest, deferred payment loans to small businesses faced with paying employees and vendors without the cash flow provided by customers. Tulare County businesses are eligible for these loans, but that wasn’t the case just a week ago.
When the U.S. Small Business Administration (SBA) announced on March 12 it would provide low interest, deferred payment loans to small businesses impacted by shelter-in-place rules across the country, a handful of Central Valley counties were not among those eligible for the financial tool. While Kern County was listed, Tulare, Kings and Fresno counties were not. Visalia Chamber of Commerce CEO Gail Zurek was notified of the omission on March 16 and began calling businesses and urging them to contact SBA and tell the stories of how they had been affected by rules limiting social interaction and the everyday commerce of American life.
“Initially I was shocked and horrified,” Zurek said. “I had just spent days hearing from small businesses worried they were not going to be able to keep the doors open.”
Zurek the stories of struggling Visalia businesses varied widely, but could be described in a few broad scenarios: 1.) They didn’t have enough people coming through the door to conduct consumer-driven business; 2.) their suppliers were unable to provide them with the raw materials to turn into goods and services; 3.) an accumulative impact that began shutting down business-to-business transactions. Zurek said she was surprised to find out that without a disaster declaration in place, an area’s inclusion was based on reports from businesses about financial damages.
“We don’t have the type of businesses in this area that take out government loans,” Zurek said. “Traditionally, we have not been a business community that looks for government handouts. So the process was new to many of us in the area.”
While chamber members were inundating the SBA’s Fresno Office with phone calls and emails asking why Tulare County was not listed, simultaneously local politicians were becoming aware of the situation as well. Congressman Devin Nunes’ (CA-22) office began making phone calls at the federal level to lobby for their constituents to be included. Congressman T.J. Cox sent a letter to Gov. Gavin Newsom asking him to invoke a section of the Small Business Act that permit a Governor to certify an area has suffered “economic injury” as the result of a disaster and in need of financial assistance that is not available on “reasonable terms and conditions” in the absence of a disaster declaration by the President, which didn’t come for another five days.
“The coronavirus has unfortunately jeopardized the economic well-being of this area, because people are concerned with protecting the health and safety of themselves and their families.” said Rep. TJ Cox. “Both our local firms and residents are feeling the impact of the coronavirus. Small businesses tend to have little cash reserves, and limited ability to raise capital. As a result, such small firms are unable to meet the financial demands when unforeseen disasters occur. […] SBA’s assistance can help address these problems immediately and help our residents begin to recover.”
On March 19, the SBA responded by adding Tulare, Kings and Fresno to the list of eligible counties. Dawn Golik, district director for SBA’s Fresno Office, said initially 30 counties were eligible for disaster relief loans due to COVID-19, but now all 58 California counties are eligible. Golik encouraged every business to apply, as each loan is reviewed on a case-by-case basis.
“Business may not even be immediately impacted as the disaster may take time to affect them, which is why the disaster declaration for SBA is good through December 2020,” she said.
The loans are economic injury disaster loans which provide working capital for businesses and non profit organizations to make payroll, pay their electric bills and build products and services. These loans cannot be used to repair, replace or purchase physical assets. SBA is offering loans up to $2 million with interest rates of 3.75% for small businesses without credit options and a rate of 2.75% for nonprofits with terms as long as 30 years. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.
Business owners can begin their application on the SBA website at https://disasterloan.sba.gov/ela/.
The website is already overwhelmed and asking small businesses to apply after 7 p.m. EST to avoid issues. The website can also timeout while you are trying to input the right documentation and numbers throughout the application process. Golik offered a few tips for filling out the online application:
-Be sure to hit the “Save” button in the top right-hand corner of every page after completing the page. This will ensure that if your session times out you don’t have to begin the x-step process over again.
-Important documents businesses will need to fill out include: IRS Form 4506-T for each person owning at least 20% of the business; your most recent federal income tax return for the business, which includes the legal name of your business not a DBA or abbreviated names, EIN number and legal name of the owners; a year-end profit and loss statement and balance sheet; SBA Form 1368 providing monthly sales figures; and SBA Form 2202, a Schedule of Liabilities listing all fixed debts, such as loans or leases with annual or monthly payments and end date for the borrowed amount.
After you have completed step 1, the loan application, SBA will then review your credit before beginning step 2, verifying your losses, determining your eligibility and reaching a loan determination. The goal is to finish this process within two weeks of completing the application. Step 3 includes reviewing and signing loan closing documents, followed by an initial disbursement. For economic injury loans, the disbursement would be $25,000 within five days of closing documents. A case manager will then be assigned to each business to ensure you meet all of the conditions of your loan. Loans may be adjusted after closing due to changing circumstances, such as increasing the loan for unexpected repair costs or reducing the loan due to additional insurance proceeds.
For additional information, please contact the SBA disaster assistance customer service center. Call 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail [email protected].