Many of you may have received an email portal from SBA to review loan eligibility and review of documents to receive funds.  Loan approvals have ranged from $10,000 to $150,000 or more.  Many of you have questions about the loan and its requirements.  Below are some important terms, guidelines and liabilities for you to consider and be aware of.

Benefits of the loan:

1. It is a low interest rate for 30 years. 
2. Under $25,000, no collateral or lien is required.
3. Loan process is simple and straight forward.   
4. No personal guaranty of the owner is required to sign. 
5. If need be, within 2 years from the loan approval date, borrower can request additional funding.
6. Borrower creates a relationship with SBA for future funding possibility.

Use of the Loan Proceeds:

Borrower MUST USE ALL the proceeds of the loan solely as a capital to help/assist economic injury caused by disaster occurring in the month of January 2020 and continuing thereafter.  Therefore, the loan CANNOT be used for personal use or for a different business of the borrower.   

Guidelines & Requirement of SBA:

1. Borrower must obtain and itemize receipts of funds spent and retain paid invoices receipt of funds spent for 3 years.
2. Borrower must maintain current and proper books of account for most recent 5 years until 3 years after loan is paid in full.
3. Each year, within 90 days, borrower must furnish to SBA financial statement.
4. Borrower will not use the funds to relocate the business without consent of SBA. 
5. Borrower shall attempt to obtain financing from other sources and shall notify and keep SBA informed of its status.
6. Within 1 year, borrower must provide insurance naming SBA as an additional insured.   
7. At the request of SBA, borrower to provide a statement “Accountant’s Review Report” prepared by accountant. 
8. Borrower cannot without consent of SBA make any distribution, transfer, loan or gift, bonus to any third party.
9. Borrower will, to the extent possible, purchase only American equipment and products. 

Liability:

1. Business owner cannot sell or transfer business without the consent of SBA.  If sold or transferred, SBA consent and payment must be made. 
2. A UCC-1 lien is filed against the business corporation.  Thus, if the business is sold, transferred, assigned, then lien must be cleared by paying off the outstanding loan.
3. If lien against the business, then borrower cannot obtain any additional financing on the same business.  Lender may not provide additional funding on top of SBA loan.
4. If borrower is a real estate company and if there is an existing mortgage against the property, then receiving SBA loan can be a default on the mortgage already against the business/property.   
5. If Borrower fails to pay the loan then, borrower’s credit rating will be effected, thus preventing borrower to obtaining additional funding. 

Penalty:

1. Borrower shall be civilly liable in an amount equal to one and one half times the original loan amount.
2. False statement or misrepresentation to SBA may result in criminal, civil or administrative sanction, including fines or prison or both. 

During these unprecedented times of COVID-19, SBA has streamlined the loan application process, however, there are many guidelines and requirements that borrower must adhere to.  If you have any additional concerns or questions, please do not hesitate to contact me.