Running a small business can be rewarding, but it can also be challenging even in the best of times. With the uncertainty surrounding the coronavirus (COVID-19), many small business owners are seeing a downturn. If you're worried about your business, a loan from the U.S. Small Business Administration (SBA) could help you manage costs until conditions improve.
How SBA loans work
As their name suggests, SBA loans are loans guaranteed by the U.S. Small Business Administration. However, the SBA doesn't actually lend money. Instead, they work with a network of lenders who provide loans to small businesses.
The SBA offsets some of the risk for lenders, making it easier for small businesses to access capital. Because SBA guarantees the loans, the rates are usually competitive. Along with providing much-needed capital, some SBA loans also come with counseling and other types of support to help you sustain your business.
SBA loans and coronavirus (COVID-19)
The coronavirus is affecting small businesses across the country. Interrupted supply chains, reduced foot traffic, and decreased spending are all contributing to financial strain.
In his March 11 speech, President Trump announced he was instructing the Small Business Administration to provide capital to companies affected by the coronavirus. Additionally, he indicated that he'd be asking Congress to increase funding for SBA loans to $50 billion. There isn't yet a timeline for when these funds might be approved or available to businesses.
The SBA is currently offering low-interest disaster loans for small businesses suffering substantial economic losses as a result of the coronavirus. These loans can be used to pay fixed debts, and cover payroll costs, accounts payable, and other bills. Non-profits and individuals may also be eligible. If you qualify for a disaster relief loan, you can apply online, by mail, or in person.
How to get an SBA loan for your business
You could be eligible for an SBA loan, even outside of emergencies, if you own a for-profit business that operates in the U.S. You'll need to have invested your own time or money into the business and exhausted other financing options.
SBA loans range from $500 to $5.5 million and can be used for a variety of business expenses. Loans can be used to cover working capital (revolving credit, loans, seasonal financing, etc.) and fixed assets (equipment, furniture, real estate, etc.).
Carefully review the terms of each lender for specific eligibility requirements and restrictions.
Can I get an SBA loan if my business is affected by the coronavirus?
The Small Business Administration announced on March 12, 2020, that it will be offering low-interest federal disaster loans for businesses impacted by the coronavirus. Businesses can borrow up to $2 million if they qualify. There is a three-step process to apply for a disaster relief loan.
Does my business qualify as "small" for an SBA loan?
The Small Business Administration defines "small" based on revenue and number of employees. The exact numbers to qualify as a small business vary by industry. You can use the SBA's size standards tool to see if you qualify.
What is the SBA?
SBA is an abbreviation for the U.S. Small Business Administration. The SBA is a federal agency that was created in 1953 with a mission to help small businesses. It provides financial assistance, including SBA loans, as well as counseling and other types of support to small businesses.
If you need money faster
If you can't wait to be approved for an SBA loan, a business credit card that offers an intro 0% APR on purchases for a year or more could help you cover expenses in the short term. During the intro period, you won't pay interest, but be sure to pay off your balance before the intro period ends or interest can build up.
A good option is the Chase Ink Business Cash card which offers 0% interest for the first 12 months on purchases.
In addition to giving you a full year to pay down your balance without paying interest charges, the Ink Business Cash card has a $0 annual fee and offers up to 5% cash back on purchases. New cardmembers can also take advantage of the card's valuable sign-up bonus — Earn $500 bonus cash back after spending $3,000 in the first 3 months.