The federal government has been working on various pieces of legislation to help out both individuals and businesses during the COVID-19 pandemic. The SBA has started processing the millions of loan applications that have poured in as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). We’ve already offered our readers an in-depth guide to the CARES Act and provided a state-by-state guide to for small businesses. Check those out for additional information.
In this blog, we wanted to cover an additional resource for small businesses: the Express Bridge Loan (EBL) Pilot Program. Designed to supplement the Small Business Administration’s (SBA) existing disaster loan programs, the EBL was made effective on March 25, 2020. Though its origins predate the COVID-19 outbreak, its implementation couldn’t come at a more necessary time. So let’s break it down as we have the others, so all of you can get started with your applications to help keep your business afloat during these remarkably difficult times.
Though the EBL has been in existence since October 16, 2017, the expansion of the program went into effect on March 25, 2020, to serve as a supplement to the normal SBA disaster loans. It aims to provide expedited loan guarantees to any small business affected by a disaster. More specifically, this expanded pilot program is meant to reach the countless businesses currently affected by the COVID-19 pandemic.
Though these loans must be applied for through private lenders, they are backed and paid for by the SBA. The Pilot Program will run through March 31, 2021, and businesses can apply for up to $25,000 of assistance. Because of the immediacy, the situation requires, loan distribution is being expedited to reach businesses as quickly as possible. They’ve guaranteed delivery of the loan within 45 days of approval.
The EBL offers broad terms for the use of the loan money. Unlike the Payment Protection Program, which specifically enumerates expenses that can be covered, the EBL allows businesses to use the money for any operational expenses that are vital to the continuation of your business.
Qualifying for this loan isn’t quite as simple. It’s geared towards helping small businesses but the size restrictions of what constitutes a small business vary by industry type.
Sizes are measured by two factors: dollars in revenue and number of employees. Many farming businesses, for example, are only ranked by size by their revenue rather than total employees. A farm, of course, could have just a handful of employees, but many millions in revenue. Manufacturing, on the other hand, requires a larger labor force and is therefore subject to size standards based on the total number of employees.
The SBA has an extensive list of size qualifications for their loans based on industry. Below is a brief list of some of the most common retail business types of our customers and their size requirements for the loan:
- Furniture Stores – $22 million
- Electronics – $35 million
- Supermarkets – $35 million
- Convenience Stores – $35 millon
- Bakeries – $8 million
- Liquor, Beer, & Wine Stores – $8 million
- Health Stores – $16.5 million
- Music Stores – $12 million
- Sporting Goods – $16.5 million
- Bookstores – $30 million
- Gift Shops – $8 million
- Pet Stores – $22 million
- Smoke Shops – $8 million
- Theme Parks – $41.5 million
- Museums – $30 million
- Zoos – $30 million
Start by talking to your business lender. The loan can be applied for in conjunction with other SBA loans and grants. All eligible small businesses must have had an established business bank on or before March 13, 2020. Small businesses must prove this relationship with a current bank statement or any other banking related document that establishes the correct business address.
Upon applying, your small business will be evaluated by several standards in addition to size:
- Small Business Scoring Service (SBSS) Score: This is produced by consumer credit bureau data, business bureau data, and specific financials of your business. As of this writing, the minimum score required was 130.
- Personal Credit Score: A personal credit score is required for the guarantor of each business only.
- IRS Tax Transcript: The banking lender must sign a 4506-T form and get an IRS tax transcript that includes all tax return data and adjusted income.
- Business Banking Relationship: Again, each business must prove an existing relationship with their bank from at least March 13, 2020.
Any businesses with outstanding debt with the federal government will not be approved. Additionally, if a business partner is incarcerated, the loan application will also be thrown out.
There are several forms that must be filled out to complete the application:
- Form 1920 – The lender must complete to document the terms of the loan.
- Form 1919 – The borrower must complete to provide identifying information and complete a background check.
- Form 159 – Lenders must submit if the applicant paid a fee for applying.
- Form 601 – For any loan that will use $10,000 or more for construction, the borrower and contractor must both sign.
- Form 4506-T and IRS Transcripts – Filled out the lender.
- Form 912 – If business owners have a past criminal history enumnerated by questions on Form 1919, they will also need to fill this one out.
Lenders will help small businesses through this process, but it’s helpful to have a head start and know what you’ll need going into the process.
Unlike the PPP and EIDL grant, this loan must be repaid. Each lender will set the repayment terms and conditions, but the maximum interest rate is 6.5% over prime. The bank can make it fixed or variable, too.
There are also some stipulations on the loan fees:
- Upfront fees cannot be more than 2% of the total loan amount and cannot exceed $500.
- The annual service fee can be no more than 0.55% of the balance.
- An application fee cannot be greater than 2% of the loan or greater than $250.
- Any late fees cannot be greater than 5% of the missed payment.
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We’re always here to help out our small businesses with as many resources as we can. We know this is a crazy time for everyone and are also very much looking forward to life getting back to normal! Whether you’re an existing customer or just a reader, let us know if you have questions or any suggestions for what worked for your business. It’s all going to be a lot of learning as we go.