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SBA Bridge Loan Can Help Small Businesses Weather Revenue Losses, But Program Closes in March

  • SBA’s Express Bridge Loan Pilot Program allows borrowers to quickly access up to $25,000
  • Borrowers can choose a term loan or use it as a bridge for EIDL funds
  • Program was designed for disaster relief, but was extended to all SBA Express Lender clients due to the COVID-19 pandemic

As a third wave of COVID-19 infections has dampened consumer demand and prompted new business restrictions in many areas, a U.S. Small Business Administration program offers certain small businesses an opportunity for short-term emergency funding.

The Express Bridge Loan Pilot Program, part of a suite of COVID-19 relief options offered through the SBA, allows qualifying borrowers to quickly access up to $25,000. The goal of the program is to rapidly provide relief for a temporary loss of revenue, and funds can be provided as either a term loan or as a bridge loan to help support operations while the borrower applies for an Economic Injury Disaster Loan.

The program predates the pandemic, being established in 2017 to supplement existing disaster relief programs by providing quick aid to small businesses affected by presidentially declared disasters or emergencies. It was expanded to assist all businesses affected by the COVID-19 pandemic in March 2020.

Loans can be structured over a period of up to seven years, although this period can be extended if the borrower does not qualify for long-term disaster financing. Lenders can charge an interest rate up to 6.5 percent higher than the prime rate, and certain fees apply. Funds are typically disbursed within 45 days of the lender’s receipt of an SBA loan number, and no later than 90 days after.

The SBA’s 13-page document on the Express Bridge Loan Pilot Program outlines all of the eligibility requirements and conditions. The program is limited to SBA Express Lenders, and borrowers must have had an existing relationship with the lender prior to the disaster declaration – March 13, 2020 in the case of COVID-19 relief. Borrowers must also demonstrate that they were operational at the time of the disaster and that they have been incapable of acquiring funding through other, non-federal sources.

Businesses must meet other requirements, such as industry-specific size restrictions that cap the business’s payroll at 100 to 1,500 employees and revenues at $750,000 to $35.5 million, not being delinquent on any other federal debts, and not be imprisoned, charged with a crime, or on probation or parole. Lenders consider the borrower’s business and personal credit scores, IRS tax transcript or equivalent, and banking relationship.

There are few requirements on how a business can spend the funds when applying for COVID-19 relief. The SBA says a business must simply demonstrate that it has been “adversely impacted” by the pandemic and that the funds will be used exclusively for the “survival and/or reopening” of the business. Loans are disbursed as working capital, and can be repaid in full or part by any ensuing EIDL funds.

The Express Bridge Loan Pilot Program will expire on March 13, 2021. The SBA is set to evaluate whether to extend it or make it permanent.

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