Top Class Actions’s website and social media posts use affiliate links. If you make a purchase using such links, we may receive a commission, but it will not result in any additional charges to you. Please review our Affiliate Link Disclosure for more information.
Small Business Administration Loan Overview
The ongoing coronavirus pandemic has drastically shifted life as we know it for the last several months, affecting our workplaces, our kids’ schools, our health and the health of our friends and families, our finances, and the economy in general. Small businesses have been hit particularly hard by the pandemic as many have been unable to provide their usual goods and services to the public, or have had to switch around their business models to try and make up for these changes.
The federal government offers these kinds of businesses options for a Small Business Administration loan, including loans focused on helping small businesses in these tough economic times.
How Does a Small Business Administration Loan Work?
SBA loans have been available for years, as they offer funding for businesses. These loans are partially guaranteed by the government, which minimizes the risk for the issuer of the loan. SBA loans are not provided directly through the government. Instead, the Small Business Administration works with a number of approved financial institutions (generally speaking, these are major traditional banks), which in turn will lend money to small businesses. These institutions can offer loans more frequently and with better terms because of the SBA’s partial guarantee of the loans, meaning they will cover a certain portion of the loan if you end up being unable to pay it back. The SBA may cover as much as 85 percent of the total amount of the loan.
What Are the Small Business Administration Loan Requirements?
One of the drawbacks to the extensive protections the SBA offers through this loan process is that, as it is offered by the government, the application process is considered to be quite restrictive.
Small Business Administration loan requirements do differ from lender to lender. But in general, eligibility Is based on:
- What a business does to receive its income
- The character of its ownership
- Where it operates
Other requirements often include:
- Certain size standards
- Being able to repay
- Having a sound business purpose
Specific Small Business Administration loan requirements will be provided by the lender.
There are a number of loan options the SBA is offering as coronavirus relief for small businesses through the CARES Act that are different than its traditional funding programs, created specifically to address COVID-19 issues. The first is the Paycheck Protection Program (PPP), which offers loan forgiveness for businesses who take out traditional SBA loans and retain their employees in exchange.
How Long Do You Have to Pay Back the Loan?
Repayment of SBA loans ranges based on lender and agreed-upon terms, but generally go from 5 to 25 years. The standard SBA loan repayment term length is 10 years.
Notably, however, the Paycheck Protection Program offers a way out of this repayment during COVID-19: businesses who retain their employees during the coronavirus pandemic may be eligible for loan forgiveness.
Coronavirus SBA Loan Problems (why is this a legal issue?)
So far, a number of lawsuits have already been filed over issues with the Paycheck Protection Program—not for the small businesses themselves, but for the PPP agents that assist small business owners with their applications. Under the terms of the PPP, these agents (often accountants and attorneys) should be paid a fee for their work: a certain percentage of each loan. This is similar to the way compensation works for PPP loan lenders.
The PPP Information Sheet outlines agent compensation as follows:
- 1% on loans below $350,000.00
- 5% fee on loans between $350,001.00 and $2,000,000.00
- 25% fee on loans above $2,000,001.00
However, PPP agents have reportedly been being denied their rightful agent fees by the lenders who are facilitating these loans on behalf of the government.
Small Business Administration Loan Litigation
Several class action lawsuits have already been filed in different states regarding the lack of payment for agents by PPP lenders.
Before turning to litigation, the first step is to consult the PPP lender in question about the issue, but if this attempt at communication fails, turning to legal counsel may be necessary.
If you have done work as a PPP agent on behalf of borrowers seeking a loan under the CARES Act, but you have not been properly compensated with the agent fee required by the SBA, you may be able to file a lawsuit and pursue compensation.
Filing a lawsuit can be a daunting prospect, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.
