CARES Act: SBA 7(a) Changes and Application Process
Mar 31, 2020
The legislation of the CARES Act includes multiple sections aimed at providing direct and indirect financial relief to businesses and individuals severely affected by the COVID-19 pandemic through temporary amendments to the Small Business Association (“SBA”) 7(a) Loan Program.
The CARES Act extends both the eligibility requirements and availability of funds under the current 7(a) Loan Program to assist small businesses in covering payroll and operating expenses during this difficult time. In addition, it includes provisions for the deferral of payments on such loans, as well as loan forgiveness on certain funds utilized to maintain payroll costs through the covered period (subject to specific restrictions/reductions). As an incentive to financial institutions, the Act also includes an increase to the percentage guaranteed by the SBA during the covered period.
Withum’s SBA Financial Assistance Services Group is working diligently to provide updates on the CARES Act as information becomes available. In particular, we have been fielding many questions about the application process and required documentation. While there may be additional requirements as part of the qualification process for a 7(a) loan, we believe that the following items found on the SBA issued checklist are mandatory:
- SBA Loan Application (SBA Form 1919) – Please note it may be the case that a separate application will be required relating to the amended program
- Personal Background and Financial Statement – To assess your eligibility, the SBA also requires you to complete the following forms:
- Business Financial Statements – To support your application and demonstrate your ability to repay the loan, prepare and include the following financial statements:
- Profit and Loss (P&L) Statement – This must be current within 180 days of your application. Also include supplementary schedules from the last three fiscal years.
- Projected Financial Statements – Include a detailed, one-year projection of income and finances and attach a written explanation as to how you expect to achieve this projection.
- Ownership and Affiliations – Include a list of names and addresses of any subsidiaries and affiliates, including concerns in which you hold a controlling interest and other concerns that may be affiliated by stock ownership, franchise, proposed merger or otherwise with you.
- Business Certificate/License – Your original business license or certificate of doing business. If your business is a corporation, stamp your corporate seal on the SBA loan application form.
- Loan Application History – Include records of any loans you may have applied for in the past.
- Income Tax Returns – Include signed personal and business federal income tax returns of your business’ principals for the previous three years.
- Résumés – Include personal résumés for each principal.
- Business Overview and History – Provide a brief history of the business and its challenges. Include an explanation of why the SBA loan is needed and how it will help the business.
For the most up to date information regarding all SBA programs offered to provide relief during this difficult time, please be sure to sign up for Withum’s email communications mailing list here. If you would like to speak directly to a member of our SBA Financial Assistance Services Group, please reach out to your Withum service partner or sign up here.
SBA Financial Assistance Guidance and Loan Resources