Coronavirus Updates

SBA Disaster Loan Assistance: How to Get Your Share (No, It’s Not Too Late!)

Expertise: Business Management, Personal Finance
80 Articles Written
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A lot of small business owners and independent contractors got really excited in early April when the White House announced $349 billion in Small Business Administration (SBA) loans to try to keep small businesses and independent contractors afloat during the COVID-19 pandemic. Lawmakers promised the loan application process was going to be simple and involve little documentation so the cash could get where it's needed fast. It was touted that business owners could receive an emergency $10,000 grant—essentially free money—while waiting for their loan to be approved.

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Even though these loan programs were fraught with rapidly changing information, misinformation, and confusion, millions flocked online to try to grab the low-cost cash. Now those programs are pretty much tapped out. But Congress is hoping to fill the pipeline with a second wave of assistance.

So, here’s what you need to know.

Related: Coronavirus Content & Resources

Coronavirus Small Business Loans

These ambitious SBA disaster loan assistance programs are trying to keep the economy going by putting paychecks in the hands of employees who work at small businesses or are self-employed. For the purposes of these loans, a small business is defined as having fewer than 500 employees.

There are more than 30 million such businesses in the U.S., and they’re big players in our national GDP. They make up 99 percent of firms in our economy and create more than two-thirds of new jobs, according to the SBA. Add an additional 10-15 million independent contractors (who file tax returns)—and there’s a lot of people vying for these loans.

Given these programs were unprecedented and massive in scope, there have been many hiccups along the way. The SBA website crashed a number of times from the sheer volume of applicants, which delayed getting loans approved and forwarded to banks.

Banks, too, have been frustrated with the whole system, wanting more direction on how to process the loans. There’s also been a hushed concern about fraud, since the loan applications don’t ask for the standard documentation. Banks aren’t used to letting money fly out the door without diving deep into who they’re lending to.

“Banks of all sizes have been frustrated by technical issues and conflicting program guidance that slowed the initial movement of funds,” says American Bankers Association President and CEO Rob Nichols.

Who Can Apply for SBA Disaster Loans?

Business owners with under 500 employees and independent contractors are eligible—as long as your business does not involve illegal activities, loan packaging, speculation, multi-sales distribution, gambling, investment, or lending and as long as the business owner is not on parole.

What about the real estate industry, specifically?

If your business earns income that is strictly passive, then no, you aren’t eligible. In general, there are a lot of real estate businesses that are excluded—like apartment building owners or developers who subdivide property. However, if you can show active income and payroll expenses and are not in an excluded category, then you may be able to apply.

Small business owners from all walks of life are lining up for an infusion of cash.

Jeani Volker is a sole proprietor who sells wellness supplements and offers in-home massage to her elderly clientele in Los Angeles. She says applying online wasn’t that easy.

“I was excited that someone like me could be included in this, but it seems every week you hear something different. I had to apply twice for the $10,000 grant because I filled everything out but didn’t get a number. Then I waited for hours on the phone to find out what to do,” Volker said.

The two main SBA loans for small businesses are the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL).

Related: Coronavirus Relief Programs: Financial & Medical Assistance, Business Guidance, Unemployment Information, & More

Paycheck Protection Program (PPP)

This is a new $349 billion SBA loan-guarantee program that was designed specifically for the COVID-19 crisis. The PPP offers loans up to $10 million to help employers keep workers on the payroll for at least eight weeks from the time they receive the loan proceeds. The SBA will forgive the loans if all employees are receiving paychecks during that two-month period and the money is only used for payroll, rent, mortgage interest, or utilities.

However, loan forgiveness will be reduced if you let go of workers during those eight weeks or if salaries and wages decrease. Loan payments are deferred for six months, and the initial interest rate is 1 percent. These criteria may change with a second round of loans, so it’s best to check the details on the SBA website.

The Economic Injury Disaster Loan (EIDL)

This SBA-guaranteed loan is not a new program. EIDLs have always been available when natural disasters interrupt business—things like hurricanes, floods, wildfires, and the like. Now we can add viruses to the list.

The EIDL only provides up to $2 million to tide businesses over, but what got everyone excited is the provision that says small business owners can immediately receive $10,000 in an emergency grant—that doesn’t have to be paid back—while waiting for their loan to be approved.

closeup of folded stacked newspaper with business section visible

That has been further clarified. The owner can receive $1,000 per employee, up to 10 employees. In other words, an independent contractor who thought they could get $10,000 would only get $1,000 in an emergency advance, since they are the only employee. However, it's now all moot since the SBA recently announced it has doled out all the emergency grants for this round.

Though the EIDL application has been streamlined a bit for this national emergency, a small business or independent contractor will still have to provide figures on gross revenues, cost of goods sold, operation expenses, number of employees, and more. The loan has an interest rate of 3.75 percent and can be repaid for up to 30 years.

You can use it for the same types of expenses as the PPP—payroll, rent, mortgage interest, and utilities. However, if you get both a PPP loan and an EIDL, you have to use each loan for different expenses. For more details and to learn how to apply, go here.

There are also other SBA loan programs that are always available—such as Bridge Loans, which provide up to $25,000 in emergency cash and debt relief—where the SBA may make loan payments on your behalf. Find out more on the SBA website.

It’s Not Too Late!

Needless to say, millions of small business owners and independent contractors are pinning their hopes on receiving help from the federal government during this pandemic. You should also check online often for state and local assistance, given everything is very fluid and changing rapidly.

Jeani Volker, the sole proprietor who has the wellness business in Los Angeles, says an infusion of cash to keep her going would prevent draining her fast-dwindling savings account.

“When the economy gets going again, people are going to be thinking about their health—especially after spending several months on the couch. If I can hang on until then, I’m confident I can get back on track.”

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Questions? Comments? Updates that haven’t been reflected above? 

Join the discussion below in the comment section.

Scott Royal Smith is an asset protection attorney and long-time real estate investor. His law firm, Royal Legal Solutions, helps thousands of real est...
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    Account Closed
    Replied 5 months ago
    Hi Scott, A rehab project I was working on has come to a halt because the contractors have been impacted by the coronavirus. According to the GE, two of his crew members have come down with the virus, one hospitalized, the other contracted the virus and his wife is critical in the hospital. As a result, work has come to a halt. I have enter an application for EIDL, but have not heard back from them yet. I applied for the Federal Disaster Loans for Businesses. Called 4/4/2020 and they said they have my application. But,I have not received a response. Please advise. Michele Galloway Galloway Investments, LLC
    Nathan G. Real Estate Broker from Cody, WY
    Replied 5 months ago
    I don't personally know anyone that has received an EIDL loan. I applied for one, primarily to obtain the $10,000 grant. That grant was then reduced to $1,000 per employee, which is still $6,000 for me, but haven't seen a dime. I applied for PPP and received $55,000 a week after application. Our state offered a grant of $5,000 and it was gone in one hour, before anyone even knew it was available. It apparently all went to friends of politicians and bankers. Chamber of Commerce just offered a grant of $10,000 through the "Save Small Business" program that is privately funded. They opened applications at noon and stopped taking applications six hours later because the funds were spoken for. I have dozens of local friends with small businesses and not one of them was able to even log onto the website and start the process. The bottom line? Our government created / exacerbated this crisis and forced businesses to close and lay people off. Then our government offers assistance but it appears to be going to the big players and not the people most damaged. Despite all the money flowing, I anticipate we'll see hundreds of thousands of businesses destroyed.
    Sulaiman Shah Real Estate Investor from Staten Island, New York
    Replied 5 months ago
    I agree 100%. Most of the PPP loans went to big businesses first. I wonder maybe it is because it is easier for the banks to just hand it out to the big businesses they already do business with. Sadly a lot of small businesses will probably go broke after this.
    Emmett Bond Investor from Bellingham, WA
    Replied 5 months ago
    Actually it is a bit more sinister. The banks are being given up to 5% of the loan amounts as “processing fees” so it made sense for them to pick lager businesses from their loan application queue first, rather than deal with 1,000 small businesses and independent contractors. This is why publicly traded companies like Shake Shack were able to get approved for $10 MILLION DOLLARS in funding while the vast majority of small businesses got none, as the funds ran out.
    Miles McClure Flipper/Rehabber from Colorado Springs, Co
    Replied 5 months ago
    Acutally banks are the one making the loans... with their money.... they have to be compensated for processing and doing the work. SBA guarantees the loan assuming the bank does the process correctly so if you don't pay it back or qualify for forgiveness the bank is not on the hook for the money sent out but that's after 2 years of 1% interest. The fee structure is actually 5% up to 350k. 3% 350k-2million and 1% 2million-10million.
    Erny Liauw from Cumming, Georgia
    Replied 5 months ago
    We applied EIDL 2 weeks ago, actually for the grant, but we have never heard it back until today. We also applied PPP for three of our restaurant businesses last week, 2 of those been told to have been approved, but till today, we haven’t closed the loan yet. I was wondering if the money is there. Heard couple big chains got the PPP already. Really big chains? Then, how about us, small businesses that really need it?
    Karla Rowe
    Replied 5 months ago
    I'm self employed & run a home cleaning service & hire seasonal labor . I applied for the EIDL 3-30-20, listed my info & 3 employees. Today I called the SBA & was told I was DENIED, they don't know the reason either. So if I didn't get anything the 1st round what hope is there for the 2nd? I'm a single mom, low income & file my business on my tax return over 15 years. In 1 season alone I've hired 15 people. How am I denied the EIDL & why? How can the SBA change the original Cares Act? How are applicants that applied later than I did receive funding but me & countless others don't? Truly disgusted
    Marcin Nurek Rental Property Investor from Crown Point, IN
    Replied 5 months ago
    Does the recipient of the $1000 EIDL treat this as a grant (free) or a loan at 3.75%?
    Matt Rachow Investor
    Replied 5 months ago
    I would have to agree with the negative sentiments about the over site (or lack there of) with the PPP program. I witnessed first hand how a few friends, who's businesses had under 30 employees, immediately apply only to find out later they were passed up. Comparatively I also heard about two other friends who had larger businesses each receiving a deposit for over 900k and 3.6m$. Issue being that the former friends each had to switch banks as their original banks were not participating. They essentially filed their application and paperwork many days after the first people who did not receive funds.
    Alex Williams from St.Pete Beach, Florida
    Replied 5 months ago
    Matthew T. Investor from Springfield, Massachusetts
    Replied 5 months ago
    Anyone know of any news on the Main St Lending Program?
    Aaron Duncan
    Replied 5 months ago
    Hi All, Long time reader, first time commenter. I’m a sole proprietor/Single member LLC owner of a tax/accounting business and I applied and received my funds for the EIDL. Had my doubts but here was my timeline: - applied for the EIDL on 3-31-20 and got application number - received email about clarification stated above about $1k per employee on 4-13-20 - 4-22-20 received deposit of grant into my account So ALOT longer than the “within 3 business days” the website claims in regards to the grant but it came. Many of my sole proprietor friends in business Facebook groups said they saw a hard pull on the credit report just 2-3 days before deposit so that’s something to add on outside of my experience. Good luck to all on the 2nd round.