Part of the collateral damage of the COVID-19 pandemic is the impact it has had on businesses around the country. Reduced hours, layoffs and business closures have become a part of our immediate reality; and many businesses have faced the terrible decision between letting employees go and losing so many resources they fear they will be unable to reopen when the pandemic has passed. This is especially difficult for small businesses, some of which simply do not possess the means to survive an extended disruption of their business.
The SBA Economic Injury Disaster Loan (EIDL) program has become available to small businesses. Michael Ashcraft, Senior Area Manager and PIO for the Kentucky District Office, urges every business owner affected by the pandemic to apply for the EIDL. The defining factors that determine whether a business is categorized as a small business are constantly updated, Ashcraft said, and many businesses that would qualify might not believe they would.
“That’s one of the challenges,” Ashcraft said. “To let the larger small businesses know that there is a good chance they will qualify.
“In the state of Kentucky, over 99% of the businesses are classified as small,” Ashcraft said. “And that is over 350,000 businesses currently in our state, and 30 million nationwide.”
Once a business reaches a certain size in its industry, then factors such as the number of employees are taken into account to determine how that business is qualified. These standards are regularly updated, and may be different from business to business, depending upon which industry category they fall under.
“Many businesses just assume they are too big to qualify,” Ashcraft said. But there are many opportunities available such as loans, government contracts, etc., of which businesses might not be aware.
“They don’t even think about it; but now is a good time as a business owner to look at all of your options,” Ashcraft said. “Even things you may never have considered.”
Ashcraft also had some insight for newer businesses seeking to apply for the EIDL program.
“There are of course exceptions, but the main factor is business history,” Ashcraft said. “In many cases you don’t have to show a five-year history of business or even the two-year history. If the business has any history, they are eligible.”
Typically, a business with less than a two-year history is considered a start-up, but Ashcraft said he encourages every impacted business to look into the EIDL.
“Many businesses think they aren’t going to qualify,” Ashcraft said. “But we are urging everyone to apply. The website is a secure portal where they can submit their applications and supporting documents. But there are actual loan officers who look at the application. And these people look to see eligibility — and 99 of these businesses pass the first hurdle of qualifying as a small business. That’s the first step. The second step is what kind of impact has it had on your business?”
Ashcraft said the SBA has fielded numerous questions over the last 10 days, such as ‘How much money will I get?’ Most people, he said, are thinking in terms of conventional loans where they apply for a certain amount from a conventional bank or other lender, then that lender says yes or no to the loan. The EIDL loan differs from conventional loans in many ways, Ashcraft said. “With an EIDL, it is different.”
Ashcraft said the SBA has been doing such loans since the 1950s.
“Since we were formed in the 1950s, SBA has handled these disasters,” Ashcraft said. “We look at the situation as it was for the business before the disaster, which is why one of the forms asks for sales from the last three years — but if you don’t have three years, put what you have. And then we ask for what you anticipated for sales at whatever point you filled out the form. In this case, Jan. 31, 2020, as the moment in time when the COVID-19 began to affect the entire country.
“What they will be looking at is what have your historical expenses been and what have your historical sales or revenue been,” Ashcraft said. “They will be looking at this, then they will ask what you expected to have had this not happened.”
At that point, Ashcraft said, they can make some fairly accurate projections on where the business would have been. This could even include a projection based on new contracts, for instance, that showed no history but would have yielded future revenue and sales, etc.
Ashcraft stressed that the process was interactive but could not begin unless affected businesses apply. The SBA, he said, offers not only the EIDL, but can help a business understand what it truly needs to get through the difficult economic times caused by the COVID pandemic. And SBA also wants to ensure that the business survives first and foremost, Ashcraft said.
“These loans can go up to 30 years,” Ashcraft said. “We don’t want to see the owner burdened with a large monthly payment that gets in the way of them getting back to normal.” The beginning of getting back to normal, he said, was visiting the web portal at sba.gov/disaster.
Ashcraft said the system might prove a little slow due to traffic, but he offered some tips to speed up the process. The computer being used should have an Internet Explorer browser 10 or more current, users should enable/allow (at least temporarily) cookies and JAVA Script, and should have Adobe Reader (which is free, and the web portal has a downloadable link). And he also encourages printing out all the documents.
Ashcraft also cautioned businesses to upload information rather than email it. Uploads are secure, he said, but emails are more susceptible to third-party hacking.