How to Apply for Coronavirus Business Loans

The Paycheck Protection Program officially ended on May 31, 2021. Read our PPP page for more information or visit our PPP Loan Forgiveness Guide.

As part of a larger relief package, Congress has approved $284.5 billion in new Paycheck Protection Program funding. The types of businesses and industries that are eligible for PPP loans have been expanded under the new bill. Additionally, businesses that can demonstrate at least 25% reduction in gross receipts year over year and meet other requirements may be eligible for a second PPP loan.

The Ultimate Guide to Coronavirus Business Loans

Quick Links

• What Is a Coronavirus Business Loan?
• Application Process
• Who Can Apply
• Rates and Terms
• Top Alternatives
• Additional Resources

If you’re a business owner who has been impacted by the coronavirus outbreak, you may be able to qualify for financial aid and relief from a variety of sources. Now that the federal government has passed phase three of its stimulus packages to address the economic fallout from the novel coronavirus, known as the CARES Act, more funding options are available to small businesses across the country.

Through the CARES Act, Small Business Administration loan programs have either been created or received an injection of funding that allows them to disburse loans as well as forgivable loan advances. Additional financial help such as tax credits was also included in the legislation.

In this guide, we’ll break down everything you need to know about coronavirus business loans from the SBA—including how they work, who is eligible, and what the application process looks like. Plus, we’ll discuss a handful of coronavirus business loan alternatives if you can’t qualify or wait for that funding.

Check out our list of state-by-state resources available for businesses affected by COVID-19.

At this stage, you have a few options when it comes to receiving a financial lifeline through an SBA coronavirus business loan.

The CARES Act directed the creation of the Paycheck Protection Program (PPP), which will be administered under the SBA 7(a) loan program and given $349 billion in funding. This initiative provides 100% federally guaranteed loans to small businesses, to be distributed by existing (and, increasingly, newly added) lending partners such as local banks and credit unions.

The most important aspect of this program is that these Paycheck Protection Program loans may be forgiven by lenders (who will then be reimbursed by the government) if borrowers maintain their payrolls or restore their payrolls quickly after the crisis.

Though the PPP will be funded through the SBA 7(a) loan program, many of the 7(a) program’s requirements, such as the need to demonstrate the inability to obtain “credit elsewhere,” will not apply to these loans.

You’ll want to consider applying for an Economic Injury Disaster Loan (EIDL) from the SBA. This program is already up and running, and you can begin the application process today.

Currently, all U.S. states and territories have been declared disaster areas by the SBA, and therefore, small businesses across the country are eligible to apply for these business loans, regardless of the specific location.

Through this program, the SBA is providing Economic Injury Disaster Loans to eligible businesses to help offset the temporary loss of revenue due to the coronavirus outbreak.

EIDLs are low-interest, long-term working capital loans that, unlike most SBA loans, are funded by the SBA. Typically, the SBA does not directly disburse loans to small business owners. Through its 7(a) and 504/CDC loan programs, for example, the SBA partially guarantees loans that are made by SBA-approved local banks. In the case of EIDLs, however, the money will come directly from the SBA.

With the passage of the CARES Act, the EIDL program received an additional $10 billion in funding from the federal government. You’ll also be able to receive up to $10,000 in an emergency grant cash advance that can be forgiven if you spend it on maintaining payroll, paid leave, increased costs, mortgage or lease payments, or other financial obligations. (Note that due to demand, the SBA has told applicants their cash advance will be based on the number of their pre-disaster (January 31, 2020) employees, providing $1,000 per employee up to $10,000.)

Of the two programs we’ve discussed, the EIDL program is the only one currently up and running as of this writing.

According to the SBA, the Paycheck Protection Program will be up and running on Friday, April 3. Business owners will be able to apply for a PPP loan through a participating SBA lender, bank, or credit union and be approved the same day. Because the SBA will not review loan applications and lenders only need to determine if a business was operating before a certain date, the hope is that the application and disbursement process will be streamlined.

Your lender will register your loan with the SBA and receive a loan number from the SBA. From there, your lender will be in charge of administering the loan.

Currently, there are two main ways you can apply for an EIDL coronavirus business loan from the SBA.

First, you can complete an application online on the SBA Disaster Loan Assistance website. The SBA recommends using the online application for an easier, faster, and more accurate application process. The SBA recently revamped and streamlined the process for applying for an EIDL, and you can find the application on their website. According to their estimates, it will take a little over two hours to complete the application.

You can also download a paper application and mail it to the SBA. Additionally, you can call the SBA Customer Service Center (800-659-2955) or send an email to disastercustomerservice@sba.gov to receive disaster loan information and an EIDL application.

Typically, you can also work with your local SBA office or affiliated SBA partner to submit an application in person, however, due to the virus outbreak, many of these offices and centers have transitioned to working remotely. Therefore, if you’re looking for assistance with your application, we’d recommend first emailing or calling your local center to see how they can accommodate you.

Whichever method you choose, you’ll want to make sure that you submit a complete application. If your application is incomplete, the SBA will notify you regarding what’s missing, but you’ll also fall back in the queue of applications.^[1]

Generally, you’ll receive a decision on your SBA loan package in 21 days if you’ve provided all of your required information accurately, though due to overwhelming demand this may take longer than expected. If you’ve been approved for an EIDL, the SBA will inform you of the loan amount and terms you’ve qualified for—they’ll also send closing documents for you to sign. Once you’ve reviewed, signed, and returned the loan agreement, the SBA will send the funds via direct deposit in three to five business days.

Remember: Applicants who apply for this loan can request an advance of up to $10,000 from the SBA, to be distributed within three days of applying. Applicants won’t be required to repay that advance if they are denied a loan, so applying for an EIDL is practically a must for many affected businesses.

Technically, any small business owner (from sole proprietors to those running businesses with up to 500 employees) who feel their business has been impacted by the coronavirus pandemic can likely make the case to apply for a loan from either program. The exact nature of the impact, as well as how quickly you need funding, may dictate which loan product you apply for.

That being said, let’s break down who exactly can apply for each coronavirus business loan.

Businesses that are eligible for a PPP loan include:

• A small business with fewer than 500 employees
• A small business that otherwise meets the SBA’s size standard
• A 501(c)(3) with fewer than 500 employees
• An individual who operates as a sole proprietor
• An individual who operates as an independent contractor
• An individual who is self-employed who regularly carries on any trade or business
• A Tribal business concern that meets the SBA size standard
• A 501(c)(19) Veterans Organization that meets the SBA size standard

Note that under the CARES Act, sole proprietors, independent contractors, and self-employed individuals can apply for a PPP loan to cover wage, commission, income, or net earnings from self-employment that is not more than $100,000 in one year, pro-rated for the covered period.

As we mentioned above, all 50 states (and all counties within those states), all U.S. territories, and Washington D.C. have been declared disaster areas—and therefore, affected businesses in these locations can apply for EIDLs. To meet this located-based qualification, however, your business must have a “tangible and significant” physical presence in a declared disaster area.

Economic presence alone does not meet this requirement and having a P.O. box alone does not qualify as a physical presence. In essence, then, any business actually located in the U.S. (or one of the U.S. territories) meets this requirement. You can review the full list of eligible disaster areas on the SBA’s Disaster Loan Assistance page.

This being said, the SBA states that the following types of businesses are eligible to apply for EIDLs:

• Small businesses
• Small agricultural cooperatives
• Small aquaculture businesses
• Most nonprofit organizations

Additionally, this qualification includes businesses directly affected by the COVID-19 pandemic, businesses who offer services directly related to the businesses in the declaration, and other businesses indirectly related to the industry that is likely to be harmed by losses in their community. As an example of the latter, a manufacturer of a product may be eligible as well as the wholesaler and retailer of that product.

Businesses that are not eligible to apply for an SBA coronavirus business loan include agricultural enterprises, religious organizations, charitable organizations, and gambling businesses.

The rates and terms of these two SBA coronavirus loan programs will differ.

Loans through the Paycheck Protection Program can be up to 2.5x the borrower’s average monthly payroll costs (incurred during the year prior to the loan date; or for new businesses, for January and February 2020), though not to exceed $10 million.

These loans have a five-year maturity, with interest rates capped at 1%. There will be no SBA fee for a PPP loan, nor will there be prepayment penalties. No personal guarantee or collateral will be required. Payments on the loan can be deferred for 10 months. (Note that some of these details have been updated to reflect the guidelines of the PPP Flexibility Act.)

In terms of loan forgiveness, borrowers will be eligible for loan forgiveness equal to what they spent on the following areas during the eight-week period beginning on the date of the origination of the loan:

• Payroll costs (including salary, wages, commission, tips; payment for sick, family, medical or vacation leave; allowance for dismissal or separation; group health care benefits including premiums; retirement benefits; state or local assessed on the compensation of the employee)
• Interest on mortgage obligations
• Rent on a leasing agreement
• Payments on utilities
• Additional wages to tipped employees

Payroll costs that are not eligible for forgiveness include compensation of individual employee annual salaries above $100,000; payroll taxes, railroad retirement taxes, and income taxes; compensating employees who live outside the U.S.; qualified sick leave wages for which a credit was made available under the Families First Coronavirus Response Act.

For more information on loan terms, specifically on how to calculate payroll costs or how loan forgiveness can be reduced, review this explainer from the U.S. Chamber of Commerce.

EIDLs are available in amounts up to $2 million with repayment terms of up to 30 years (terms are based on your ability to repay the loan).

Because of the demand for coronavirus-specific EIDLs, however, the SBA has told recent applicants that these loans will be capped at $15,000 for two months of working capital for the time being.^[2]

The fixed interest rates for these coronavirus business loans are 3.75% for small businesses and 2.75% for nonprofit organizations. Additionally, these loans offer four months of payment deferral automatically that begins from the date of the note.

Funds from these EIDLs can be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid if the disaster (in this case, the coronavirus outbreak) had not occurred. These coronavirus business loans, however, are not intended to replace lost sales or profits or to be used for business expansion.

If you’re denied for a coronavirus business loan from the SBA, or are seeking more immediate options, there are other solutions you can turn to for business funding. Here some of the top options you might consider:

The impact of the coronavirus outbreak on U.S. business owners and society at large is growing by the day. It’s too soon to say when business as usual will return, which means small business owners will need every bit of help they can get from organizations like the SBA to stem the losses felt by this disease.

This being said, as the U.S. government responds to this crisis, legislation is ongoing with regard to financial relief—including SBA funding and other funding for coronavirus business loans.

Additionally, you can use the following resources for helpful and up-to-date information on SBA coronavirus business loans and other relevant news:

• The Small Business Administration’s website
• The SBA’s Disaster Loan Assistance website
• Follow the SBA on Twitter
• Contact the disaster assistance customer service center at 1-800-659-2955 or email disastercustomerservice@sba.gov.

Of course, as we learn more about available coronavirus business loans and how small business owners can apply, we will update this page as well as our other resources.

For additional advice, you can read our comprehensive guide on how the coronavirus may impact your business and actions you can take now.

1. SBA.gov. “Applying for SBA Disaster Loans (EIDL)“
2. NYT.com. “$15k Cap“