As part of EIDL requirements, you are required to have hazard insurance in order to apply for the EIDL loan. The SBA recently sent out an email to all of those who have received the EIDL loan, and they are requiring proof of insurance in order to get your loan forgiven.
As a business owner, if you do not have hazard insurance, now is the time to get it! Brenda Jo at Competitive Edge has helped many people acquire hazard insurance to ensure they remain compliant with the EIDL requirements.
Here’s a look at what the email states, and why you might need hazard insurance.
The email stated:
“The SBA is launching a new round of Economic Injury Disaster Loan (EIDL) Advances – called Targeted EIDL Advance – which provides eligible businesses with $10,000 in total grant assistance. If you received the EIDL Advance last year in an amount less than $10,000, you may be eligible to receive the difference up to the full $10,000. The combined amount of the Targeted EIDL Advance and any previously received Advance will not exceed $10,000.”
Along with additional information claiming that:
“Businesses eligible for the Targeted EIDL Advance must meet ALL the following eligibility criteria:
- Located in a low-income community, as defined in section 45D(e) of the Internal Revenue Code. The SBA will map your business address to determine if you are in a low-income community when you submit your Targeted EIDL Advance application.
- Suffered economic loss greater than 30 percent, as demonstrated by an 8-week period beginning on March 2, 2020, or later, compared to the previous year. You will be required to provide the total amount of monthly gross receipts from January 2019 to the current month-to-date.
- Must have 300 or fewer employees. Business entities normally eligible for the EIDL program are eligible, including sole proprietors, independent contractors, and private, nonprofit organizations. However, agricultural enterprises, such as farmers and ranchers, are not eligible to receive the Targeted EIDL Advance.”
The EIDL has said that loans won’t be forgiven unless you have proof of insurance coverage. If you’re looking to check which Covid-19 loans are forgivable, check this list.
Why is SBA changing its loan policy?
Lenders and CDCs are required to ensure that all collateral with a recoverable value is adequately insured in order to protect the ability to recover on the SBA loan. Generally, SBA will not require that you pledge collateral to secure a physical disaster home or business loan of $25,000.
What type of insurance do you need?
Under the requirements for the EIDL, the SBA requires that your business has hazard insurance to cover 80% of the loan amount. Hazard insurance is a term for coverage the may be included within several different types of property coverage.
If you have any kind of business property insurance, you are probably covered. Commercial property insurance is considered hazard insurance. This coverage protects your company’s physical assets, like buildings, furniture and equipment, supplies, computers, inventory, customer’s goods, signs, fencing, and even lost income from damage or loss.
The SBA does not allow personal hazard insurance to be considered for loans. Business auto insurance is also not allowable coverage for this requirement.
Do you have the right coverages and the correct amounts to satisfy your SBA loan?
The SBA is requiring you to have hazard insurance as a requirement to apply for the EIDL loan. If you received EIDL funds without coverage, you should contact your insurance agent as soon as possible. The SBA requires that at least 80% of your loan amount is covered with hazard insurance. It may be beneficial to have 100% of your business property value covered with hazard insurance.
There are a few other rules related to the insurance coverage that the SBA has stated:
- The insurance must be in the name of the business and must show proof of business property.
- If someone is a sole proprietor, and they have a DBA, the DBA must be on the policy.
As you look to ensure you provide proof of insurance that is compliant with the SBA’s requirements, reach out to Brenda Jo Robyn at Competitive Edge for all of your insurance needs.
Please submit the requested documents as soon as possible to complete your file. Talk to Brenda Jo Robyn today for more information!