A set of free Quick Guides to apply for a loan to the SBA Disaster Assistance Loan program are available for:

• Single Owner Businesses (sole proprietorships and single member LLC’s)
• Multiple Owner Businesses (multi-member LLC’s, partnerships, corporations, etc.)

A copy of these Quick Guides can be downloaded at: http://www.capitalinnovation.institute/pandemic

The first in a series of government disaster relief programs is the SBA Disaster Assistance Loan program which is intended to ‘meet working capital needs through the recovery period”.  A small business may borrow up to $2 million at 3.75% interest for up to 30 years.  https://disasterloan.sba.gov/ela

If you are a new, startup or growing small business or you are a small business in transition from one ownership group to the next or a small business working to relocate to a new building, city or back into the United States, you will be challenged to accurately portray your financial situation in an application to the U.S. SBA Disaster Assistance Loan program.

Both the application forms for Single Owner and Multiple Owner businesses are based upon the operation of your business over the last 36 months.  Therefore, if the operating costs of your business are going up and/or are projected to go up, historical records are unable to show this change. 

You have heard investment advertisements make the statement, “Past performance is no assurance of future performance.”  Your books and records do not create a crystal ball that will enable an SBA loan officer to see the future.  Without additional information, any loan provided to a small business may miss the mark needed to provide a small business with the money needed to cover operating costs.

Small businesses have an opportunity to share the vision of their future and try to communicate their true operating costs within the SBA Disaster Assistance Loan applications.  Within the  Single Owner Business application there is a place within SBA Form 5-C for Additional Comments (4,000 character limit online or you may attached supplemental pages by email) and within the Multiple Owner Business application there is a place within SBA Form 1368 for Additional Narrative (add pages as needed by email), a small business may provide supplemental information to “HELP ESTABLISH YOUR ECONOMIC LOSS”.

It is recommended that every small business applying to the SBA create their own personalized ‘economic impact statement’.  This ‘story’ of the small business will:

• Share how the business benefits its customers and its community
• Explain how the Pandemic is impacting the small business
• Project how long and how bad the Pandemic will impact the small business
• Explain all expenses providing a description beyond simple numbers
• Project how much capital the small business may need to recover

The economic impact statement should be added into the application.

The limits of the SBA Disaster Assistance Loan program probably will not allow the SBA loan officer to cover all the operating costs of a small business.  Other sources of capital will be needed.

New government disaster relief programs are coming.  The first wave of these programs is pumping money into the economy to keep individuals and businesses alive.  The second wave of these programs, anticipated in four weeks through the end of the year, will pump money into the economy to help it recover.  If the economic recovery programs do not consider the special needs of startup and growth businesses, including those projects that have been in development for years but not yet started, the impact on the United States economy will be to turn the clock back one, two or more years.  A do over.

For the moment, efforts must be focused on survival.   However, whenever owners of small businesses can spare some time, all business plans must be analyzed and rewritten for the markets of tomorrow.

Karl Dakin, Executive Director

Capital Innovation & Technology Institute LLC

kdakin@capitalinnovation.institute

http://www.capitalinnovation.institute

This article was first published on LinkedIn on 3/27/2020 at https://www.linkedin.com/pulse/sba-corona-covid-19-pandemic-disaster-loan-program-uses-karl-dakin/