Bridge Loan FAQs for Small Businesses

A bridge loan might be the right fit for you and your business during COVID-19. Here are answers to the top questions about bridge loans.

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All you need to know about a bridge loan — including who’s qualified and how much you can borrow

If you’re like a lot of small business owners, you got shut out of the first round of the Economic Injury Disaster Loan Emergency (EIDL) program and the Paycheck Protection Program (PPP), with funds running out in less than 2 weeks.

There are still options available, including bridge loans like the Express Bridge Loan (EBL) from the Small Business Association. Small businesses can access these loans, and the latest EBL parameters address COVID-19 impacts. Here are answers to the top questions about bridge loans so you can see if one might be the right fit for you and your business.

What do businesses use a bridge loan for?

Bridge loans “bridge” the gap and disparities that often appear in emergencies such as COVID-19. They’re temporary loans that provide fast economic support to small businesses to help them during a short-term loss of revenue.

What’s the Express Bridge Loan (EBL) Pilot Program?

The SBA created this direct loan assistance program to help small businesses that are impacted by disasters as declared by the United States President and/or the SBA. The EBL Pilot Program debuted in 2017 as a means to supplement the SBA’s other direct disaster loan options.

It was designed to be fast and effective. Through the program, SBA Express Lenders can provide emergency bridge loans for disaster-related losses for small businesses in disaster areas. Due to COVID-19, the entire country is now a “disaster area” as of March 13, 2020, which means the majority of small businesses qualify if the pandemic affects them.

How much is a bridge loan?

You can access up to $25,000 via an SBA Express Lender. The exact amount of your bridge loan will depend on multiple factors.

You can access up to $25,000 via an SBA Express Lender. The exact amount of your bridge loan will depend on multiple factors.

Who qualifies for a bridge loan?

If you’re a small business in the U.S. affected by COVID-19, you might qualify for a bridge loan. You must also show that you do not have the ability to obtain a similar loan via non-federal sources (including your SBA Express Lender). This is a “credit elsewhere” caveat.

If you can show that you can obtain some of the funds, you may still qualify. For example, if you can show that you can secure $10,000 of a necessary $25,000 loan elsewhere, you might qualify for $15,000 in a bridge loan.

What are the terms of the loan?

The EBL loan is a term loan, and revolving credit lines are not allowed. The maximum loan term is 7 years. You may need to pay part or all of the EBL loan immediately if you later get approval for long-term disaster financing (such as the SBA Direct Disaster loan) if the loan allows for EBL loan reimbursement.

In addition, the EBL falls under SBA Express interest rate terms. This means you can have a fixed or variable interest rate of up to 6.5%.

Who is a qualified lender for an EBL Loan?

SBA Express Lenders with a valid SBA Form 2424 can work with you to apply for a bridge loan. The SBA Express Lender can only offer loans to small businesses that they already have an existing banking relationship with on or before March 13, 2020 if you want to apply for funding due to COVID-19. Contact your banking institution(s) to see if they are a qualified SBA Express Lender.

How long do I have to apply?

EBL loan applications are accepted up to 6 months after a presidential disaster declaration. Currently, the approval period for EBL loans for COVID-19 is through March 13, 2021.

Why are bridge loans so fast?

SBA Express Lenders are allowed to use a streamlined underwriting approach for bridge loans. This process was designed to reduce red tape and wait periods for small businesses. It was also created to encourage SBA Express Lenders to join the pilot program when it started in 2017.

What are the benefits of applying early?

If you qualify for a bridge loan and it would benefit your business, it’s in your best interest to apply early.

Some SBA Express Lenders might cap the number of bridge loans they will accept because only 10% of their total loans backed by the SBA can include the EBL Pilot Program. The SBA doesn’t see this cap becoming a possibility (yet), but any small business owner who has struggled to get loans during these pressing times knows we are in uncharted territory.

If you qualify for a bridge loan and it would benefit your business, it’s in your best interest to apply early. The SBA is within its rights to suspend the EBL loan program for the remainder of 2020 if the EBL loans reach their limit.

Think a bridge loan might be for you? Talk with your SBA Express Lender today and consider the pros and cons. Bridge loans are quick and relatively easy to apply for, and the funds clear quickly. However, some might consider the interest rates high, so this temporary loan isn’t a long-term fix. Call your bank today to learn more about bridge loans.

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