Is Your Business Prepared to Apply for an Economic Injury Disaster Loan?

Published Thursday, March 19, 2020
Is your business prepared to apply for an Economic Injury Disaster Loan?
 
Arkansas Governor Asa Hutchinson has officially requested the State of Arkansas to be recognized as a Disaster Area by the Small Business Administration to allow for Arkansas businesses financially impacted by the COVID-19 virus to apply for Economic Injury Disaster Loans. According to the U.S. Small Business Administration, While the Governor’s request is being processed, the best thing businesses can do RIGHT NOW is to prepare the essential documents that will help the SBA quickly analyze a complete registration. What businesses will need to have is:
 
• Tax Information Authorization (IRS Form 4506-T available in the SBA loan portal), completed and signed by each applicant, each principal owning 20 percent or more of the applicant business, each general partner or managing member; and, for any owner who has more than 50 percent ownership in an affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management
• Complete copies, including all schedules, of the most recently filed Federal income tax returns for the applicant business; an explanation if not available
• Personal Financial Statement completed, signed, and dated by the applicant, each principal owning 20 percent or more of the applicant business, and each general partner or managing member
• Schedule of Liabilities listing all fixed debts
• If the most recent Federal income tax return has not been filed, a year-end profit-and-loss statement and balance sheet for that tax year
• A current year-to-date profit –and-loss statement

Key information you need to know:

Who can apply?

In order to be eligible, you must be a small business (500 employees or less).

  • Arkansas small businesses affected by the disaster - common eligible businesses include: retailers, restaurants, recreational facilities, tourism-based businesses, manufacturers, owners of rental property, hotels, wholesalers, and many more.
  • Private nonprofits
  • Small agriculture cooperatives are eligible, but agricultural enterprises are not
  • Small aquaculture businesses

How to Apply?

While paper applications are accepted, filing electronically is easier, faster and more accurate. Apply here .

How can the loan be used?

The loans are for working capital which includes fixed debts, payroll, accounts payable, and other bills that can't be paid due to the disaster's impact. It does not cover lost sales.

How much can I apply for?

You will not be asked how much you would like to borrow. The SBA uses the information you provide to determine the loan amount. Small businesses can receive a secured loan up to $2 million, and an unsecured loan up to $25,000.

Gather Your Materials:

  • Business information
  • Contact information and social security numbers for all applicants
  • Employer Identification Number (EIN) for business applicants
  • Insurance information
  • Financial information (e.g. income, account balances and monthly expenses) - Know the total amounts and payments due for debts that will be paid over the next 10 months or longer (i.e. mortgages, student loans, credit cards, etc.)

Other key information:

  • Use Internet Explorer or Mozilla Firefox to apply.
  • The 'Help Button' provides useful information for each page.
  • Use the 'Save Button' frequently.
  • Be patient and keep trying if you experience slow load times.

What's next? What should you expect?

  • You will receive email confirmation that your application has been submitted
  • You will receive an email letting you know that your application is under review.
  • BE PREPARED: You will be contacted by someone from the SBA
  • Have your monthly expenses and financial projections ready (the ASBTDC can help with this!)

Common Issues Small Businesses may Encounter with COVID-19:

  • Capital Access – Incidents can strain a small business's financial capacity to make payroll, maintain inventory and respond to market fluctuations (both sudden drops and surges in demand). Businesses should prepare by exploring and testing their capital access options so they have what they need when they need it.  See SBA’s capital access resources.
  • Workforce Capacity – Incidents have just as much impact on your workers as they do your clientele. It’s critical to ensure they have the ability to fulfill their duties while protected.
  • Inventory and Supply Chain Shortfalls – While the possibility could be remote, it is a prudent preparedness measure to ensure you have either adequate supplies of inventory for a sustained period and/or diversify your distributor sources in the event one supplier cannot meet an order request.
  • Facility Remediation/Clean-up Costs – Depending on the incident, there may be a need to enhance the protection of customers and staff by increasing the frequency and intensity by which your business conducts cleaning of surfaces frequently touched by occupants and visitors. Check your maintenance contracts and supplies of cleaning materials to ensure they can meet increases in demand.
  • Insurance Coverage Issues – Many businesses have business interruption insurance; Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
  • Changing Market Demand – Depending on the incident, there may be access controls or movement restrictions established which can impede your customers from reaching your business. Additionally, there may be public concerns about public exposure to an incident and they may decide not to go to your business out of concern of exposing themselves to greater risk. SBA’s Resources Partners and District Offices have trained experts who can help you craft a plan specific to your situation to help navigate any rapid changes in demand.
  • Marketing – It’s critical to communicate openly with your customers about the status of your operations, what protective measures you’ve implemented, and how they (as customers) will be protected when they visit your business. Promotions may also help incentivize customers who may be reluctant to patronize your business.
  • Plan – As a business, bring your staff together and prepare a plan for what you will do if the incident worsens or improves. It’s also helpful to conduct a tabletop exercise to simulate potential scenarios and how your business management and staff might respond to the hypothetical scenario in the exercise. For examples of tabletop exercises, visit FEMA’s website at: https://www.fema.gov/emergency-planning-exercises

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