Any small business that is planning to seek a Small Business Administration (SBA) forgivable loan or grant during the COVID-19 crisis should be gathering its financial documentation now. This was the important guidance in a recent webinar focused on the SBA loan process led by Ami Kassar, CEO of Multifunding LLC and author of The Growth Dilemma.
Late last week, President Trump signed the CARES Act into law, which provides businesses with fewer than 500 employees with Economic Injury Disaster Loan (EIDL) grants and “forgivable loans” under the Paycheck Protection Program provision of the law. It is important to note that you must apply for an EIDL to receive a grant of no more than $10,000. (See a summary of the small business provisions of the CARES Act.)
Booksellers should gather documentation now, because the more businesses that apply for EIDL grants and forgivable loans, the greater the strain it puts on SBA’s finite resources. It is best to have all the necessary documentation at the ready to avoid having to spend more time than is necessary online or on the phone with lenders during the application process.
Kassar explained that to secure an SBA loan (EIDL or otherwise), small business owners need to gather the following documentation:
- Three years of personal and business tax returns. Personal tax returns are for any individual who owns 20 percent or more of the company.
- Your 2019 tax returns. Try to get your 2019 tax returns done as soon as possible. If this is not possible, the lender is going to need your 2019 year-end financials.
- A personal financial statement for any owner who owns more than 20 percent of the company.
- A debt schedule for your business.
- Your monthly operating expenses from March through September of last year. You can find this information in your financial software. If you cannot find it, ask your bookkeeper or accountant for help. This data will be an important part of your loan application.
Kassar also noted that if time is of the essence, applying for a regular SBA 7(a) loan would be quicker, since SBA relies on local lenders to issue those loans. EIDLs are issued by the federal government. However, it is important to speak with your local lender or an SBA representative about what would be the loan best suited for your business.
Kassar is currently hosting daily webinars on the CARES Act. Register for a webinar here.
For more information, check out the SBA website.