SBA Loan Types

There are multiple types of loans that breweries and other small businesses will be able to apply for from the Small Business Administration (SBA). Breweries should work with an SBA lender to learn what type of loans will work best for their business.

The SBA does not provide direct loans. The process starts with your local lender, working within SBA guidelines.

7(a) SBA Loans

• The 7(a) loan program is the SBA’s primary program for providing financial assistance to small businesses under the Payment Protection Plan. The terms and conditions, like the guaranty percentage and loan amount, may vary by the type of loan. 
• Under the Payroll Protection Program (PPP) in the CARES Act, breweries with less than 1250 employees (set by the SBA as the size standard for breweries) may apply for 7(a) loans to help them cover business costs during the COVID-19 crisis. If breweries use those funds to cover payroll and meet specific requirements a portion of their loan can be forgiven by the SBA. It is important to speak with your lender to ensure you have clear understanding how you can qualify for the loan forgiveness.
• In addition to small businesses, sole-proprietors, independent contractors, and other self-employed individuals are also eligible for these loans.
• The loan amount is tied to payroll costs incurred by the business to determine the size of the loan, with a maximum loan amount of $10 million. This amount is available only through December 31, 2020. See COVID-19 SBA Loan Q&A.
• Lenders are required to determine whether a business was operational on February 15, 2020 and had employees for whom it paid salaries and payroll taxes.
• There are limitations on the assistance a borrower can receive on these loans and economic injury disaster loans (more information below) through SBA for the same purpose. 
• On March 31 ,2020 the SBA released additional information about the loan’s terms and conditions. All loans under this program will have the following identical features:
  • Interest rate of 0.5%
  • Maturity of 2 years
  • First payment deferred for six months
  • 100% guarantee by SBA
  • No collateral
  • No personal guarantees
  • No borrower or lender fees payable to SBA
• Paycheck Protection Program (PPP) Application Form: SBA lenders may begin processing loan applications under the PPP as soon as April 3, 2020. If you wish to begin preparing your application, use this sample form to see the information that will be requested from you.

Economic Injury Disaster Loans (EIDL) and Emergency Grants*

According to the SBA website, for your state to qualify for economic injury disaster assistance loans (EIDL) at least five small businesses within the state/territory have suffered substantial economic injury. The SBA has declared that disaster assistance loans will be available statewide following an economic injury declaration. This will apply to current and future disaster assistance declarations related to Coronavirus.

• These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. 
• SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.  SBA is allowed to approve and offer these loans based solely on an applicant’s credit score, or use an alternative appropriate alternative method for determining applicant’s ability to repay. 
• The CARES Act also establishes an emergency grant to allow an eligible entity who has applied for an EIDL loan due to COVID-19 to request an advance on that loan, of not more than $10,000, which the SBA must distribute within 3 days. It also states that applicants shall not be required to repay advance payments, even if subsequently denied for an EIDL loan.
• In advance of disbursing the advance payment, the SBA must verify that the entity is an eligible applicant for an EIDL loan. This approval shall take the form of a certification under penalty of perjury by the applicant that they are eligible.
• Outlines that advance payment may be used for providing paid sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses.

*The CARES Act provides a limitation on a borrower from receiving this assistance and an economic injury disaster loan through SBA for the same purpose. It does allow a borrower who has a disaster loan unrelated to COVID-19 to apply for a PPP loan, with an option to refinance that loan into the PPP loan. The emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven under the Paycheck Protection Program.