Express Bridge Loan Pilot Program: What Should I Know?

May 7, 2020
Man in a home office reading about the Express Bridge Loan Pilot Program in a book.

With the coronavirus still raging through the United States, the SBA continues to accept loan applications from small businesses affected by the pandemic. Not only did the government provide additional funding to disaster loans such as the PPP and EIDLs, but there’s also still funding for the Express Bridge Loan (EBL) Pilot Program, designed to provide immediate relief to eligible borrowers.

What is the Express Bridge Loan?

EBLs were implemented to serve as a midpoint between businesses’ monetary immediate needs and longer-term loans, particularly the Economic Injury Disaster Loan (EIDL). The SBA’s Express Bridge Loan is offered to small businesses that have encountered financial hardship due to the COVID-19 pandemic. The truely unique feature of EBLs is the fast turnaround time, in comparison to other loans. 

What is a Pilot Program? 

Pilot Programs are offered for a limited time to small business owners that qualify. The program also allows Lenders (such as your current bank, credit union, or other financial institution) to expedite guaranteed funding to your business in emergency cases. The EBL Pilot Program can only be made available for a longer time if extended or permanently offered by the Small Business Administration.

Who is Eligible for EBLs?

Small businesses located in counties declared disaster areas under the Presidential Disaster Declaration are eligible for an Express Bridge Loan. Small businesses within all 50 states, territories, and the District of Columbia that have been impacted by the COVID-19 pandemic are also eligible for an Express Bridge Loan. 

How Much Can I Borrow?

Business owners seeking an Express Bridge Loan can receive a maximum of $25,000. 

How Can I Use the Loan Money?

EBL funds are working capital, which designates that the loan money should aid businesses impacted economically by COVID-19.

What are the Interest Rates and Fees?

There are several fees for EBLs, including an annual service fee, application fee, late payment fee, and upfront guaranty fees. Additional information regarding these fees and their accompanying rates are below: 

  • Annual service fee: Up to 0.55% of the remaining balance on the loan
  • Application fee: The greater of $250 or 2% of the total loan amount
  • Late payment fee: Maximum of 5% of the scheduled payment
  • Upfront guarantee fee: 2% of the guaranteed portion of the loan to a maximum of $500

The interest rate for Express Bridge Loans is the Maximum of Prime + 6.5%.

What Lenders are Authorized to Provide EBLs? 

Lenders are authorized to provide EBLs to business owners that have a relationship with their institution. This means that business owners must already use their current bank or credit union to apply for an Express Business Loan.

How Can I Find a Lender?

To find a Lender, you must already have an existing banking relationship with your financial institution. This means that you can’t join a new bank or credit union to apply for an EBL. 

What are the Terms and Conditions?

The terms and conditions for the Small Business Administration’s Express Bridge Loans are below: 

  • Collateral: Because the maximum amount of an EBL loan is $25,000, Lenders are not required to take collateral for EBL loans.
  • Eligibility period: For COVID-19 Emergency Declaration loans, Lenders may obtain SBA loan numbers for EBL loans through March 13, 2021. 
  • Multiple loans: An EBL applicant may obtain only one EBL. 
  • Secondary market prohibited: EBL loans cannot be sold in SBA’s secondary market.
  • Use of Proceeds: EBL loan proceeds must be used exclusively to support the survival and/or reopening of the small business. EBL loan proceeds may be disbursed as working capital, or for specific disaster-related purposes, such as:
    • Buying generators
    • Repair or replacement of disaster-damaged equipment or inventory
    • Making repairs to the business premises
    • And more

How Do I Apply?

To apply for an Express Business Loan, you’ll need to speak with an authorized representative at your existing business financial institution. There, you will learn more about the program and you can submit your EBL application.

What Documentation Do I Need?

You’ll need to have the following documents with you to apply for an EBL: 

  • Documentation proving an existing financial relationship between the borrower and the lender
  • IRS tax transcript
  • SBA borrower information form
  • SBA Form 159 (This Form must be fully completed and signed by the EBL applicant and the Lender if the Lender charges an application fee)

What Else Should I Know?

SBA Express Bridge Loans are a 7(a) loan, meaning that they are intended to provide financial help only to small businesses. To qualify for the EBL Pilot Program, a business owner’s personal credit score must be the same threshold as what your financial institution requires for a non-SBA loan. Funding for your Express Business Loan will be available within 45 days of submitting your application.

The interest rate that your financial institution may offer is either fixed or variable. For fixed rates, your financial institution can charge up to 6.5% over the Prime rate, regardless of the maturity of the loan. Variable rates from financial institutions can use the same base rate of interest that are used for similarly-sized, non SBA guaranteed commercial loans.  

If you cancel an undisbursed loan, then your financial institution has the right to keep the application fee. It is important to note that the application fee itself is optional. Due to the preexisting banking relationship required to receive an EBL, other fees such as broker’s fees and referral fees do not apply.

Work with a Professional

Although the EBL is available for a limited time, it will provide a much-needed boost to businesses in severe need of funding. 

For a more detailed look at bills such as The CARES Act, the Paycheck Protection Program (PPP), or the Emergency Economic Injury Grant we have additional information.

If you’re unsure about how to apply for the Express Bridge Loan Pilot Program, it may be helpful to work with an accounting professional. Don’t hesitate to seek advice from the experts to guide your business through this global crisis.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.