PLEASE NOTE THAT THIS INFORMATION IS BASED ON THE SBA PROGRAMS AS OF MARCH 23, 2020 AND MAY CHANGE SUBSTANTIALLY BASED ON PASSAGE OF THE STIMULUS PACKAGE BY CONGRESS.
Many small businesses are looking for information on how they can access loans through the Small Business Administration’s (SBA) loan programs, including the Economic Injury Disaster Loan (EIDL) program, which is available to all Ohio small businesses. We break down the requirements of the EIDL program and other traditional SBA loans.
ARE YOU A “SMALL BUSINESS CONCERN”?
The first question for whether you can qualify for an SBA loan is whether your company is a “small business concern,” which means different things for different industries. Size is measured by the SBA based on:
- NAICS code (figure out what your company’s is now, if you don’t already know it); and
- Either (a) total annual revenue or (b) average number of employees.
For example, a Commercial Banking operation must have annual revenues as high as $600 million, whereas Department Stores can have annual revenues up to $35 million, and a Full-Service Restaurant or Beauty Salon operation can have annual revenues only up to $8 million. Search your company’s NAICS number on the SBA’s size standards tool to see if you qualify.
Consolidated entities: If your company is comprised of multiple entities, the SBA’s rules require the size calculation for a business concern to include the receipts of all affiliates (i.e., those entities with common ownership, which is largely based on whether there’s power to control). If, for example, your company is a holding company that operates multiple entities in two different industries, the annual revenues of both industries will be combined in measuring whether the applicable threshold is met in either (single) industry.
After confirming you are a small business, you must determine which loan type is right for you—or whether you should pursue multiple loan options on parallel paths (which may be advisable). While the EIDL’s have received much attention due to the onset of COVID-19, depending on your circumstances, the traditional SBA “Business Loan” may nevertheless be a better option for your company. The following table helps you line up the loan profiles against your specific circumstances.
Note that the federal government is continuing to look at a number of ways to expand both the SBA’s EIDL and Business Loan programs to quickly get much-needed financial relief to ailing small businesses, so the information below is provided only as of the date of this article. We will update it with new developments as they happen.
SBA LOAN COMPARISON
For fees associated with the following loan types see here. However, EIDL loan applications will not have any upfront fees, nor will such loans have any prepayment penalties.
Note that this table does not cover the SBA’s Microloan Program, which can provide loans of up to $50K (average size is $14K) for businesses looking to launch or expand their business. It is unclear whether it could be an option for small businesses looking to bridge the financial gap created by COVID-19. A much smaller loan program, it permits use of the loan proceeds to fund: working capital; inventory or supplies; furniture or fixtures; and machinery or equipment. Proceeds from an SBA microloan cannot be used to pay existing debts or to purchase real estate. The maximum repayment term is 6 years and interest rates tend to be between 8% and 13%.
You can access our loan comparison chart here.
If you have questions about your eligibility for SBA loans, what the requirements are to apply, or how your business can take advantage of an SBA program, contact Cary Zimmerman at firstname.lastname@example.org or 216.736.7275, Anne Corrigan at email@example.com or 216.736.7227 or one of our Banking & Finance professionals.