Paycheck Protection and SBA Disaster Loan Checklist: Everything You Need to Apply

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Streamline the loan application process and get your emergency funding faster with the right documents and reports. We’ll show you exactly what you need today to win an SBA loan.

January 11, 2021, Paycheck Protection Loan Update

Congress has passed a third round of stimulus that goes into effect the week of January 11th. This includes $284 billion in relief funds for small businesses to be made available through the Paycheck Protection Program (PPP) and a slew of updates for the Economic Injury Disaster Loan (EIDL) program that will go into effect on January 15, 2021. Click here to learn where you can apply for the new PPP funds and here for up-to-date information on the EIDL changes.

With the economy in turmoil, most businesses are looking for lifelines to help them survive the crisis. Thankfully, the CARES Act has been passed. Combined with legislation passed in early March, there is now substantial support available to small businesses.

It probably all feels overwhelming, though. What should you apply for and what documentation do you need? Thankfully, the process for applying for these SBA loans has been simplified and streamlined. Here’s a guide to what you need to do and the documents you’ll need to get through the SBA loan process.

Here’s what you need to do right now

The first thing every small business (including nonprofits) should do is reach out to their banker.  The CARES Act expanded SBA Section 7(a) loans into what is being called the Paycheck Protection Program, which is available through your local bank and other SBA approved lenders. 

Through this program, you can borrow up to 2.5-times your average monthly payroll for the past 12 months. If you use the loan to pay payroll, rent, utilities, and other key expenses, up to 8 weeks of those expenses will be forgiven. 

That means free money for your business. We’ve pulled together a detailed guide on Payroll Protection loans if you want to read all the details.

The documents you need for a Payroll Protection Loan

  • The loan application: This is a really simple document. It will only take 15 minutes to complete.
  • Payroll documentation: You can either run a report from your accounting system, or from your payroll system.
  • A Profit & Loss report from the last 12 months: Again, you should be able to get this from your accounting system. Not all banks will ask for this information.
  • Your most recent tax return: Some banks will ask for your most recent tax return
  • Articles of incorporation: You should have this document on file from when you formed your business. If you are applying for the loan from the bank you normally do business with, they may already have a copy on file.

The documents you need for an SBA Disaster Loan

You may also want to consider applying for the SBA’s Economic Injury Disaster Loan (EIDL). Unlike the Payroll Protection Program, these applications go straight to the SBA and the loans come from the US Treasury – you don’t work with your banker for these loans.

Rates are 3.75% and you can borrow up to $2 million. When you apply, you can get an immediate advance of up to $10,000. We’ve got all the details on EIDL loans here. And, you can apply online here

Here’s a list of what you’ll need to apply for an SBA Economic Injury Disaster Loan:

Due to the unique nature of the economic situation caused by the coronavirus, the SBA has created a simplified online application for COVID-19 EID Loans. The following are the typical forms the SBA uses for disaster loans. You can use these as a preview of the type of information that the SBA may ask for as part of the application process.

  • Monthly Sales Figures for the past fiscal year: You should be able to export these from your accounting software.
  • Yearly sales summaries for the past 3 fiscal years: Again, these should be easily accessible from your accounting software.
  • Year-to-date sales figures: What have your sales been so far this fiscal year? 
  • Forecasts to show your income and expenses until normal operations resume: This would typically be a forward-looking Profit and Loss Statement. Obviously, you don’t have a crystal ball, so you may want to produce a few different financial scenarios to see how things might play out under different circumstances.
  • SBA Form 1368: All of the above information will be part of SBA Form 1368. If you apply online, you’ll input much of this information.
  • SBA Form 413: This is a personal financial statement. 
  • SBA Form 2202: A list of current liabilities. This is a list of all your current debts – who you owe and how much.
  • IRS Form 4506-T – Request for Transcript of Tax Return, required for the applicant entity and everyone with ownership of 20% or greater (download form, complete, sign, upload as PDF)
  • SBA Form 5 – This is the actual business loan application, but you can complete it within the online application.

Writing a business plan for an SBA Loan

When you apply for a typical SBA loan for your business, you aren’t applying for a loan directly from the SBA. You’re actually applying for a loan from your bank. What the SBA does is guarantee the loan for the bank, which makes it easier for banks to make loans to small businesses due to the decrease in risk.

Every bank is going to have a slightly different application process for SBA-backed loans, but virtually all of them are going to ask for a business plan as part of the application process. 

Banks ask for your business plan for two reasons. First, they want to see that you’ve taken the time to think through your business strategy and how you’re going to make money. Second, they want to see the detailed financial forecasts that show how you plan on using your loan.

While this process has been simplified for COVID-19 Disaster Loans, you are still making a case for why your business needs the loan. In this situation, you are using your business plan and forecasting documents to display how the crisis has adversely affected your business and how the loan will help you maintain your expenses and extend your cash runway, as you make adjustments for short and long-term stability.

A typical business plan for an SBA loan will include the following sections:

1. Executive Summary:

2. Opportunity:

3. Execution:

4. Company and Management:

  • Team and future hires
  • Legal structure and location

5. Financial Forecast:

Check out our free, detailed step-by-step guide to writing a business plan if you need help figuring out the specifics of what you need to write for each section.

Figuring out how much money you need from an SBA Loan

You’ll also use your business plan and financial forecast to figure out how much money you need to borrow – and this is crucial information when you’re applying for a loan. 

Once you’ve created a forecast for your sales and your expenses, you’ll see exactly how much cash you need to get your business started and keep it afloat in the early days while sales ramp up. Without these forecasts, you’re just guessing at how much money you might need to get your business running.

Long-term benefits of business planning and forecasting

Developing a business plan and diving into financial forecasts may seem like a lot of work just to apply for a loan, but it’s worth the time and effort. Not only does it make you more likely to qualify, and have additional statements ready if requested by your lender, but it sets you up with solidified planning documents to reference and guide your business throughout this crisis and beyond. 

Instead of working off a week-to-week or month-to-month plan, you’ll be able to develop forecasts for the next 1-3 years for your business. And by actively updating your plan and financials, you can compare hypotheticals to your actuals, allowing you to make informed, strategic decisions at a moments’ notice. 

Free business plan templates to get you started

We’ve got some helpful free templates to jump-start your business plan:

And, if you don’t want to go it alone, our LivePlan product makes the whole business planning process fast and easy if you need a helping hand to guide you through the process.

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Noah Parsons
Noah Parsons
Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan.
Posted in Loans & Funding, Management

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