Are you looking to apply for a Small Business Administration (SBA) loan or disaster assistance for your company? Inc. columnist Ami Kassar, founder and chief executive officer of MultiFunding, a Philadelphia consulting firm that advises business owners on access to capital, took questions from business owners during a recent webinar series about securing loans in this uncertain economic environment.
Here are eight of the most frequently asked questions and his answers.
Should I apply for a disaster assistance (EIDL) or a regular SBA loan?
There are pros and cons to both. The disaster assistance loan offers lower rates and longer payback periods, but it will likely be a slower and complex process. If your business was in good shape last year and your financials were strong, you will most likely be better off going through the regular SBA loan process.
What if I have employees and offices across various states?
If you're applying for an SBA disaster loan, the address you use to file your tax returns should be the address you use to submit a loan application.
How long is the queue for traditional SBA lenders? Are they easier to get right now?
Usually SBA loans of $350,000 and under can be processed in three to four weeks, but queues may be longer during this time due to demand. The more organized and prepared you are, the more documents you have ready, the more likely your loan will be processed quickly.
What if my business is a startup and less than one year old?
You will likely be more successful with an SBA disaster loan if you have not been in business at least two years.
If I already have an SBA loan, can I get another? What are my options?
If you get an additional loan that's under $350,000, you have a little more flexibility because it can sit in second lien behind your current loan. If you need more than that, the best thing you can do is go to your current SBA lender and ask for an add-on loan. Every business owner is entitled to a total of up to $5 million in SBA loans, if you have the cash flow and the credit to back it up. However, it is possible that this will increase to $10 million with new legislation.
If my company was not profitable in 2019, is it worth applying for a loan?
It will be very difficult to get a traditional loan without proper financials, but it may be worth applying for a disaster assistance loan.
If I can't qualify for an SBA loan, should I seek out a short-term loan elsewhere?
There will be a lot of scams trying to attract small businesses with very enticing short-term loans that will have to be paid off over 30, 60, or 90 days. Beware of taking on any debt with a short-term payback and a high interest rate in this environment.