This article is part of a larger series on Business Financing.
When you apply for an SBA disaster loan such as the Economic Injury Disaster Loan (EIDL) or Military Reservist Economic Injury Disaster Loan (MREIDL), you’re required to fill out SBA Form 1368 as part of the application process. SBA Form 1368 allows small business owners the opportunity to provide details about the economic impact of a disaster on their business. It also requires you to disclose monthly sales figures, an economic forecast, and any additional information not captured in the forecast. The last section provides an important opportunity to provide details and context.
How To Fill Out SBA Form 1368
SBA Form 1368 requires you to fill out monthly sales figures and a projected profit-and-loss statement. It also offers you an opportunity to explain the figures you selected. This additional part of the application is valuable because it can increase your chances of getting funding and can put the business into context. However, it must still be accurate.
Section 1: Monthly Sales Figures
The SBA requires that you provide the last three available years of your business’ sales history. You must enter monthly sales figures for each of the three years on the form:
Filling out sales figures can take some time, but it’s an important step in establishing the impact of a disaster on the bottom line of your business. As you go through this process, take notes on specific details or anomalies, as these details will be important later when filling out the third section of the form.
Some details worth noting include:
- Unusually high or low sales in a given month
- Months with no sales
- Steady decline or increase over the past three years
- Anything else that looks unusual
Unlike many other types of SBA loans, the Small Business Administration offers SBA disaster loans directly. The key thing to remember when applying is that the person reviewing your application only sees the numbers and, unlike a local banker, doesn’t have any knowledge about your business’ performance over the years. They don’t know about your lucky break in February of last year that caused sales numbers to temporarily spike or about street construction six months earlier that slowed foot traffic into your business. Noting these anomalies provides context for your application and sales figures and will help your chances of qualifying for funding:
Section 2: Disaster Financial Forecast
The SBA also offers you an opportunity to forecast the economic impact of the disaster on your business. You aren’t required to use the SBA’s provided template to outline your forecast. If you’re completing the application on your own, we recommend that you use it.
First, you’ll need to provide an estimate of the period of time until the business will be able to resume normal operations. Once you determine that, then proceed to the following:
- Net sales: When projecting net sales, consider the first few weeks since the disaster and how that went.
- Less cost of goods sold: This has likely remained stable, but sometimes the cost of goods may have risen, which is important to note here.
- Gross profit: Subtract your cost of goods sold from net sales to get the gross profit.
Then you’ll need to account for expenses, including:
- Officers’ salaries: These are salaries paid to the owners of the business and other executives.
- Employee wages: This includes hourly wages, tips, commissions, and other forms of compensation paid to employees.
- Fixed and variable costs: This is the sum of advertising, rent, utilities, interest, taxes, insurance, and other expenses. Make sure these expenses have realistic and accurate projections that can be supported if needed.
Finally, you’ll arrive at two calculations:
- Total expenses: Get the sum of salaries and all other costs listed above and combine them for a total expense.
- Net profit/loss before income taxes: The difference between the gross profit and total expenses should be the net profit or loss.
Stop at this stage and ensure the projections are correct and that the costs are easy to understand for someone only looking at the numbers. Ensure the difference between projected net profit and the sales figures in the first section make sense and create a rational case for needing economic relief. Note anything unusual that’ll need to be explained in the next section.
Section 3: Additional Information
This section provides you with the space to explain the details of both your past sales figures and your projections. The notes you’ve been taking throughout this process all belong here. If you need to explain your economic struggles in more detail and the suspected reason for these issues, this is the time to do it.
Use this opportunity to provide context to the numbers contained in the projections for this SBA loan application. Doing this will help the person reviewing your application understand why you chose certain estimates. These explanations can increase the chances of getting approved for funding with an SBA disaster loan.
SBA Form 1368 is required for an EIDL and MREIDL application. When completing it, you must provide monthly sales figures and projected profit-and-loss information. It also offers you the opportunity to provide context and explanations for your decisions throughout the process, which can increase your chances of getting approved.