Zuby Landlords are Eligible for Financial Relief from SBA

landlord financial relief

Zuby’s mission to empower DIY landlords goes beyond the benefits of our free property management app and it includes ensuring that our community of landlords is always informed of important developments impacting their rental businesses.

On March 27th, President Trump signed into law the CARES act, a $2 trillion emergency funding bill designed to aid American citizens and businesses impacted by COVID-19.

As part of the bill, the Small Business Administration (SBA) will receive $377 billion to help small businesses impacted by the virus, and the SBA is moving very quickly to make funds available through the Economic Injury Disaster Loans program, or EIDL.

As a small scale landlord, you are a small business and therefore qualify for financial relief, including up to a $10k forgivable advance that is payable within three days.

In this article, we summarize the details of EIDL and what it means for our landlords.

Important Update #1

As of mid-April 2020, the SBA has run out of funds for the EIDL program and at the moment is no longer accepting new applications. 

However, congress passed a new funding bill that provides an additional $60 billion in EIDL funding and $320 billion for the Paycheck Protection Program (PPP), which provides assitance with covering payroll expenses.

If you would still like to apply for the EIDL loan, we encourage your to monitor the SBA’s website for updates on new applications. 

If you have significant payroll expense you should consider applying for a PPP loan The PPP program has received in new funding on April 22, 2020. To apply for the PPP loan, contant your primary bank as they will be the ones to process your application. 

Important Update #2

Since the original publishing of this article, the SBA issued a new guideline stating that due to the large number of requests, the amount of EIDL loan advance will be determined by the number of your pre-disaster employees (as of January 31, 2020).

According to the newly issued guideline, the forgivable advance will be calculated using $1,000 per employee, up to $10,000 total.

However, it seems that the SBA is overwhelmed by the number of applications and that the guidelines are constantly being updated. The latest guideline appears to be a way for them to more quickly and accurately determine the advance amounts.

Prior to this new guideline, the SBA made it very clear that landlords are entitled to the loan and advance, as you will read in this article.

Given this, and the fact that the guidelines are very fluid and are always subject to change, we still encourage all landlords impacted by COVID-19 to apply for the loan and potential advance.

How does it work?

The SBA has created an online streamlined application designed to collect information about your business and the impact that the COVID-19 pandemic has had or will have on it.

The process is as follows:

  1. Apply online here
  2. Fill in the information as accurately as possible
  3. Check the box for the up to $10k advance if you would like to receive it
  4. The SBA evaluates your application and if eligible you will receive the up to $10k advance within 3 days
  5. If you are eligible for a higher loan amount, you will be notified of next steps that will include providing further information depending on the size of the loan

What are the terms of the loan?

Below is a summary of the loan terms as provided by the SBA:

  • Businesses can borrow up to $2 million
  • The loan advance of up to $10k will not have to be repaid
  • Loans over $25k will likely require collateral
  • Interest rate of 3.75%
  • Terms of up to 30 years
  • Eligibility based on size, type of business, and resources

Are landlords eligible?

Yes. According to the SBA, owners of rental property are eligible to apply for a loan.

If you own your rental properties under an LLC, you will apply as a “business with not more than 500 employees”. If you own your properties under your name without an LLC, you will apply as an “individual who operates under a sole proprietorship”.

In the application, you will be asked to provide an estimate for the loss of rental income due to the impact of COVID-19.

Criteria for loan approval

The SBA will evaluate applicants for loan approval based on the following:

  • Credit history
  • Ability to repay
  • Eligibility
    • Must be located in a declared disaster area
    • Suffered or likely to suffer substantial economic injury from disaster
    • Must be independently owned and operated business
    • Do not have credit available elsewhere – meaning you can’t get funding from other sources
    • The size of the applicant must not exceed the size standard for your industry – meaning you must be a small business

What can I use the funds for?

The key takeaway here is that the funds are only meant to cover the expenses of running your business, not investing in the business.

For most landlords that means making your mortgage payments (as long as your mortgage is provided by a private lender and not a Federal agency, see ineligible uses below), utility bills, taxes, and other operations costs. It also means not using the funds to refinance loans or make improvements to properties.

Here is how the SBA summarizes what the funds can be used for:

  • Fixed debts (rent, etc.) – for landlords this would mean fixed mortgage payments not provided by Federal agency
  • Payroll
  • Accounts payable
  • Some bills that could have been paid had the disaster not occurred

The following are ineligible uses of funds according to the SBA:

  • Dividends or bonuses
  • Disbursements to owners, except when directly related to performance of services
  • Repayment of stockholder / principal loans, except when the funds were injected on an interim basis because of the disaster and non-repayment would cause undue hardship to the stockholder / principal
  • Expansion of facilities or acquisition of fixed assets
  • Repair or replacement of physical damages
  • Refinancing long term debt
  • Paying down (including regular installment payments) or paying off loans provided, or owned by another Federal agency (including SBA) or a Small Business Investment Company
  • Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations
  • Relocation
  • Other ineligible uses available here

A few final words

We hope that you found this information useful. If you are a small scale landlord managing your own properties, check out how you can take your rental business to the next level with Zuby.

We encourage all landlords that have been or are going to be financially impacted by COVID-19 to seek SBA assistance. As unemployment skyrockets, renters are not able to pay rent and landlords are directly impacted.

With that said, we also encourage you to be as accurate as possible when providing information and to abide by all of the requirements of the loan.

Not only is it the right thing to do and will play a big role in our country’s long-term recovery, but not doing so will potentially expose you to punitive action by the government (including having to pay back 1.5x your loan amount).