Navigating the Emergency Loan Application Process

  • 3/27/2020
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As businesses across the country feel the financial strain of the coronavirus pandemic, many are seeking emergency loans. Let’s focus on the personal financial statements and certified payrolls that are often required as part of the loan application process.

Key insights

  • Businesses looking to help offset reduced revenues might consider applying for an emergency loan.
  • As part of the application process, you may be required to submit a personal financial statement or certified payroll.
  • Before you begin the application process, you’ll want to brush up on the specifics.

The coronavirus (COVID-19) pandemic is a tragedy. Moreover, the impact of COVID-19 and our response to try to suppress it are changing minute by minute. From an economic perspective, we are only beginning to understand the extent of that impact. What we do know is many organizations are already suffering, and some operations have been reduced or shut down entirely. Reduced revenues are also resulting in working capital declines that are worrisome. As a result, there is an urgent need for financing.

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Government agencies, the Federal Reserve (Fed), and financial institutions are all working to ensure the flow of credit continues throughout the pandemic. The Fed is temporarily relaxing regulatory requirements, lowering rates, and embarking on unlimited quantitative easing. Additionally, the Small Business Administration (SBA) is now offering Economic Injury Disaster Loans to eligible small businesses and nonprofits, and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which is still pending at the time of this writing, will provide even more financing options.

This may provide organizations with an opportunity to secure new financing. Typically, the first step is to complete an application. Many application packages require would-be borrowers to submit two items that often create confusion:

  • Personal financial statements for owners
  • Certified payroll

What are personal financial statements?

A personal financial statement summarizes a person’s or family’s assets, liabilities, and net worth. It is often prepared to help obtain credit, perform financial planning, as part of tax and estate planning, or to disclose financial affairs. While there are some similarities to your business’s financial statements, there are also key differences. For example, most personal financial statements value assets at their estimated current value and liabilities at their current estimated amount, while businesses’ financial statements generally use historical cost for valuation. Additionally, you may need to submit your personal financial statement on a prescribed form, such as Form 413 for SBA loans.

What is a certified payroll?

Government programs often include compliance requirements related to payroll. For example, you may be required to include a certification that payroll data matches original records. Lenders often request a certified payroll during the application process and throughout the term of the loan to verify the borrower is meeting the compliance requirements within the loan documents. The certified payroll typically includes some compliance statements and must be signed by the borrower. At times, a certified public accountant must also sign the document.

How we can help

We’re here to help you through this complex, rapidly changing environment. Visit our COVID-19 assistance programs resource page for more information.

Whether you’re considering an SBA Economic Injury Disaster Loan or other financing, CLA is ready to help you navigate the process, prepare your personal financial statement, and assist with your certified payroll. We’ll collaborate with you, get to know your situation a little better, and help pull together the information necessary for you to submit your loan application.

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