1. I've heard that SBA loan applications are complicated
and hard to complete. Is this true? Answer
2. Must I use my own money or try to borrow from a bank before I come to SBA? Answer
3. When should I apply for the loan? Answer
4. What documentation do I need to give SBA to apply for this type of loan? Answer
5. What is an essential employee? Answer
6. What is meant by a "period of military conflict?" Answer
7. What does "substantial economic injury" mean? Answer
8. When will I know if I get the loan? Answer
9. How soon can I expect my money? Answer
1. I've heard that SBA loan applications are complicated and hard to complete. Is this true?
No. The application form asks you for the same information about the business and its substantial owners and managers that generally is required for a bank loan. If you need help, SBA personnel will explain the forms and give you assistance at no charge. You may use the services of accountants, attorneys, or other representatives if you wish, but be sure they are reliable and that their fees are reasonable. You must report the use of a representative and the fees charged on your loan application.
2. Must I use my own money or try to borrow from a bank before I come to SBA?
No. The resources of the business and its principals will be considered in determining the ability of the business to recover without the assistance of the Federal government.
3. When should I apply for the loan?
As the program applies to military conflicts occurring or ending on or after March 24, 1999, small businesses that meet all the other eligibility requirements have until November 24, 2001 to apply. Otherwise, the filing period begins on the date the essential employee is ordered to active duty and ends 90 days after the date the essential employee is discharged or released from active duty.
4. What documentation do I need to give SBA to apply for this type of loan?
The filing requirements are listed at the beginning of the application (SBA Form 5R). In addition to the financial information required you would normally submit for any loan, your application package must also include the following:
- a copy of the essential employee's "orders" for active duty or copy of their discharge or release papers from active duty status
- a statement from the small business owner that the reservist is essential to the day-to-day operations of the business along with a written concurrence by the essential employee
- a written explanation and estimate of how the essential employee's activation to military service has or will result in the small business experiencing substantial economic injury
- a description of the steps the business is taking to alleviate the substantial economic injury
- a certification from the small business owner that the essential employee will be offered the same job or similar job upon the employee's return from active duty
5. What is an essential employee?
An essential employee is an individual (whether or not an owner of the small business) whose managerial or technical expertise is critical to the successful day-to-day operations of the small business.
6. What is meant by a "period of military conflict?"
Period of military conflict means
(1) a period of war declared by Congress, or
(2) a period of national emergency declared by the Congress or the President, or
(3) a period of contingency operation.
A contingency operation is designated by the Secretary of Defense as an operation in which our military may become involved in military action, operations, or hostilities (e.g., peace keeping operations).
7. What does "substantial economic injury" mean?
Substantial economic injury means that your business either has been or will be adversely impacted by the deployment of the military reservist and that the business is
(1) unable to meet its financial obligations as they mature, and/or
(2) unable to pay its ordinary and necessary operating expenses, and/or
(3) the small business is unable to market, produce or provide a service ordinarily marketed, produced or provided.
8. When will I know if I get the loan?
That depends on when you file a complete SBA loan application. To make a loan, we must be satisfied that the business can repay the loan from its operations and take reasonable safeguards to help ensure the loan is repaid. Since we process applications in the order received, the faster you return the application with all the needed information, the faster we can work on it. We try to make decisions on each application within 7 to 21 days. Be sure the information in your application is complete; missing information is the biggest cause of delay.
9. How soon can I expect my money?
After we approve the loan, we will tell you what documents are needed to close the loan. Once we receive these documents, we can disburse the funds. Because the MREIDL funds are subsidized by the taxpayer, the SBA provides the money in quarterly installments unless otherwise specified in your loan documents.
To obtain a Military Reservist Economic Injury Loan Application please contact the Disaster Area Office that serves your state or territory.
More about managing a disaster:
Disaster Management Introduction
Disaster Preparation
Disaster Loans
Information courtesy of the Small Business Administration.
