Understanding SBA Express Bridge Loan Program


The pandemic is an example of how strategies, plans, and business models can get upended by an event beyond the control of governments and society. Similarly, other events are also known to have an adverse impact on small businesses’ ability to function smoothly.

What is SBA EBL

Express Bridge Loans are intended to help small businesses meet contingencies and manage requirements effectively. Companies face a financial crunch, with some reasons often attributed to calamities. Similarly, businesses face a squeeze due to overwhelming events in nature and impact functioning and funds.

This necessitates a bridge loan, and the US SBA EBL is a classic example of a loan that can make a huge difference. Here is an in-depth look at the loan and how it can positively impact a business that is on a slippery slope.

Purpose of SBA Express Bridge Loan

The purpose of SBA EBL is to meet expenses that are existential in nature for a small business. Unlike large enterprises with deep pockets and reserve liquidity to carry on business for a specific time without revenues, small businesses do not have the luxury and the cushion to handle costs.

Shrinking balance sheets and loss of income are common reasons for small businesses availing bridge loans. Express Bridge Loans can mean the difference between survival and shut down. The loan disbursal is the fastest and flexible, permitting business owners to get the business back on track.

A small business in the US can avail as much as 25,000 USD through this option and can use it to re-opening a business that has been closed due to some reason. The fund is also used to help sustain a company experiencing a resource crunch due to one of many reasons. The funds are regarded as working capital and are intended to be used for the above-mentioned specific reasons.

Credit Standards for EBL Loans the Various Requirements

There are clear credit standards and various underwriting requirements for availing EBL Loans. Lenders typically adopt laid down processes for EBL loans and take into consideration different stipulated conditions.

For instance, the small business scoring service score, which is evaluated based on data from the consumer credit bureau, various applications, and the financial data available with borrowers, is considered. Lenders input data into the E-Tran Loan Origination application and receive the SBSS Score. Businesses that have an SBSS score of 130 or above are eligible for EBL.

There are additional conditions that need to be followed by the Lender while processing the SBA EBL. For instance, the IRS Tax Transcript needs to be submitted in IRS Form 4506-T, which will help verify the business. The verification pertains to the existence of the business during the event mentioned as a reason for relief.

In other words, the verification is to determine that the business was in existence when the calamity or event occurred, necessitating relief. The return is also intended to ascertain that the EBL applicant had filed the mandatory tax returns. The submission of this information in the required documents is part of the loan’s mandatory processes.

Exceptional scenarios are considered, including businesses that were not required to file tax returns due to a period of existence but were in operation at the time of disaster. For instance, a business may have been in existence at the time of the disaster, but may not have been in existence long enough to be required to file a tax return. This is an exceptional scenario, and lenders are permitted to process these applications subject to verification that proves the business’s existence at the time of the calamity.

The last mandatory requirement that needs to be submitted by the Lender is proof of the relationship between the applicant and the Lender. The applicant for an express business loan should have an existing relationship with the Lender as a banking institution. This is to ensure that the risks of underwriting the EBL are managed effectively.

Proof of this relationship needs to be submitted by the Lender. It is pertinent to add that a relationship between the applicant for EBL and an entity that is an affiliate of the Lender will not count as valid. There needs to be an existing relationship between the Lender and the applicant from a banking angle.

Eligibility criteria for EBL during the pandemic

As the broad terms of the EBL have been covered above, it is time to look at EBL’s specific terms vis-à-vis COVID-19. A business that was operating during the period that included 13 March 2020 is considered as having been in existence during the pandemic. The SBA EBL is extended only for businesses that belong to the category of Small Business. In other words, any business that employs lesser than 500 individuals is eligible for the EBL. In a few exceptional cases, there is the likelihood of businesses employing more individuals that are still considered as eligible. However, this is on a case by case basis and depends on other evaluation criteria. Other eligibility requirements include the level of impact as a result of the pandemic. A business that has not been severely impacted is not considered as eligible for the EBL. As mentioned above, the applicant should have been in an existing banking relationship with the Lender.

What makes the SBA EBL a good option?

The EBL in times of the pandemic is a good option for a business that is undergoing revenue stress due to the lockdown. The loan is extended without collateral, which is often the biggest obstacle for availing SBA loans. The term of the loan is typically seven years, and this gives the borrower ample time to repay after emerging from the doldrums.

Additionally, the loan tenure can also be extended by the Lender if the borrower cannot secure other long-term funding to mitigate the crisis. The disbursal amount of 25,000 USD helps businesses with fast liquidity to tide over crises easily. Borrowers are expected to repay the amount either in full or in part depending on the availing of long-term funding from other sources.

The rate of interest is capped as 6.5% apart from the prime rate, which is effectively the best rate reserved by institutions for customers who are considered creditworthy. While fees apply for the EBL processing, the amount is reasonable considering the speed of disbursal and the minimum requirements.

The fee is typically 2% of the loan amount, and the minimum chargeable is 250 USD. While the loan comes with late payment charges of 5% of the loan amount and possible liquidation costs, other charges are not applicable.

Forms required for US SBA EBL

The forms that are required for availing EBL include the following

  • SBA Form 1920 – Lender’s Application for Loan Guaranty
  • SBA Form 1919 – Borrower Information Form
  • SBA Form 159 – Disclosure regarding payment
  • 1502 – Lender Reporting Form
  • SBA Form 601 – Applicants Agreement of Compliance – for an amount above 10,000 USD
  • IRS 4506 – T – Transcript
  • SBA Form 912 – Statement of Personal History

The forms need to be submitted in electronic form and in permitted formats that include the standard TIFF and PDF. Applicable conditions are to be self-certified as ‘true’ by borrowers, and the completed forms are to be submitted via email. The originals with signatures are to be retained by the Lender for future compliance requirements.

The flexibility of the loans and the disbursal speed make it a handy source to mitigate the effects of the pandemic. Borrowers have simple requirements to be fulfilled that are designed to help tide over the crisis. 

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