Small businesses are the backbone of America. When the global pandemic brought the nation to its knees, the government acted quickly in passing legislation to support individual Americans and small businesses with financial aid and SBA small business loans.

How COVID-19 Changed the SBA Loan Forever

The COVID-19 pandemic had lasting effects on the lending market and SBA emergency loans for small business. The CARES Act gave birth to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDL). Backed by the SBA’s approved lender network, the pandemic and its new loan vehicles added depth to the SBA loan.

The Alternative Lending Industry During the Pandemic

When analyzing the correlation between the 2008 crisis and the COVID-19 pandemic, banks have tightened their lending criteria for small- and medium-sized businesses. Because subprime borrowers struggle to get small business loans coronavirus relief from prime lenders, there is an opportunity for fintech lenders to provide crucial commercial funding.

Alternative lenders already enjoy a fair share of the small business lending landscape. According to the 2019 credit survey by the Federal Reserve Bank of New York, about 33% of small businesses selected alternative lenders over banks when applying for credit.

This number will continue to rise in the coming years, but the 2020 pandemic shook the alternative lending industry. Between Q1 and Q3 of 2020, only 50% of the top pre-existing alternative lenders survived. COVID-19 and its lasting impacts continue to force these fintech companies to readjust their financing, underwriting, acquisition, and portfolio management strategies.

How Businesses Qualified for SBA Disaster Loans

An SBA disaster loan delivers critical economic relief to nonprofit organizations and small businesses that currently suffer from temporary revenue losses during the pandemic. Many loan recipients used the funds toward regular operating expenses and working capital, like utilities, rent, health care benefits, and fixed debt payments.

The loan term interest rates are set at 3.75% fixed for businesses and 2.75% fixed for nonprofits. These loans do not include penalties or fees for pre-payment and are set at 30 years in length.

The SBA offers four different disaster loans:

  • Physical damage – covers replacement and repairs of damaged physical assets in a disaster
  • Mitigation assistance – covers small business operating expenses specifically after a disaster
  • Economic injury disaster – delivers financial relief to nonprofits and small businesses that experienced damage to their personal property or home
  • Military reservist loan – this loan aids with operating expenses to compensate for employees who are on active duty leave

Businesses with 500 or fewer employees can qualify for the SBA disaster loan. Agricultural companies are also eligible after revisions confirmed by Congress in response to the pandemic. Agricultural businesses include ranching, food and fiber, livestock raising, aquaculture, and other related industries included in the Small Business Act.

You can find other SBA guidelines for small business loans here.

The CARES Act, Paycheck Protection Program, and EIDL

In a swift response to the pandemic, governments worldwide introduced programs to give lifeblood to the economy. The CARES Act, Paycheck Protection Program, EIDL all played a role in saving American small businesses, which make up over 99% of all companies in the U.S..


To stabilize the United States economy, the government established the CARES Act (Coronavirus Aid, Relief and Economic Security Act). The primary purpose was to support workers and their families in the wake of a devastating pandemic that left millions of people out of work.

For those with an annual income less than $99,000, the CARES act delivered economic relief payments to households of up to $1200 per legal adult. Following up in 2021, the Coronavirus Response and Relief Supplemental Appropriations Act provided more payments of up to $600 per legal adult and $600 for each child who qualifies.

Paycheck Protection Program

On April 3rd, 2020, Congress passed the CARES act to provide almost $350 billion under the Paycheck Protection Program (PPP). These small business loans for COVID-19 kept businesses alive because they helped meet workforce wage demands. The PPP funds enabled small businesses to keep workers employed through the pandemic to compensate for revenue loss.

SBA provides PPP loans to businesses with less than 20 employees and sole proprietors between February 24th and March 10th, 2021. Small businesses can find a lender and identify the right loan of their choice. There are two types of PPP loans for small businesses:

  • First Draw PPP Loans – available to businesses who have never received a PPP loan in the past
  • Second Draw – available to businesses that have received a PPP loan in the past

Borrowers are also eligible for PPP loan forgiveness if they meet a set of requirements. For First Draw PPP loans and Second Draw PPP Loans, businesses qualify for forgiveness if the following criteria are met in the designed 8- and 24-week period:

  • Compensation and employee thresholds are maintained
  • Proceeds from the loan are used for payroll and other eligible costs
  • 60% or more of the proceeds are directed toward payroll costs


In June of 2020, the SBA opened the Economic Injury Disaster Loan (EIDL) loan and grant program. Because of the CARES Act, Freelancers, gig workers, and independent contractors can receive up to $1,000 from the COVID-19 small business grant. These loans are not required to be repaid.

Agricultural and small businesses can also apply for EIDL. Employees are entitled to up to $1,000 each, and the company can receive a maximum of $10,000.

You might wonder where can I apply for the SBA grant? There is a straightforward process to apply online here, and you can find other relevant information on the SBA’s website.

How to Apply for SBA Small Business Loans

Once you have decided to apply for an SBA loan, you will need to gather the necessary documentation for the application. Although the SBA does not deliver direct loans, the overall process will start with a local lender within SBA parameters. You will also need to create an SBA loan login so that you can check your SBA loan status.

Below are the necessary documents and steps on how to apply for SBA small business loans:

  • SBA Loan Application Form– complete the document by accessing it here
  • Personal Background and Financial Statement – you will need to fill out SBA Forms 912 and 413
  • Business financial statements – to properly support your SBA loan, you will need to complete and deliver a P&L (profit and loss) statement and a statement with a detailed projection of financial health
  • Ownership and affiliations – provide any addresses and names of subsidiaries and entities where you hold a controlling interest
  • Business licenses and certificates – supply your original certificate or license of doing business
  • Loan application history – provide detailed records of past loans you applied for
  • Income tax returns – submit signed business and personal federal tax returns within the last three years
  • Resumes – supply a personal resume for each principal
  • Business overview and history – write a brief history of your company, its challenges, and why your business needs an SBA loan

Need help navigating your loan options? Reach out to ROK Financial today!

About the Author, Madison Taylor

Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates! Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.