SBA Form 1368 offers small business owners the opportunity to show the financial impact of an economic disaster on a business. It comprises three sections that require you to disclose monthly sales figures, an economic forecast, and additional information not captured in the forecast. The last part is an important opportunity to explain any details and to provide context.
Who Completes SBA Form 1368
When you apply for a Small Business Administration (SBA) loan, you’ll be required to fill out more forms compared to traditional business loans. While banks offer several types of SBA loans, the SBA offers disaster loans directly, making them more paperwork intensive.
Business owners applying for an Economic Injury Disaster Loan (EIDL) or Military Reservist Economic Injury Disaster Loan (MREIDL) must complete SBA loan form 1368. This includes anyone applying for disaster loans based on economic injury caused by the COVID-19 pandemic. The form should demonstrate how the declared disaster directly harmed the business’s finances. For most business owners, this is the best opportunity to justify the requested SBA disaster loan size in dollars and cents.
What Each Section of SBA Form 1368 Means
SBA loan form 1368 requires monthly sales figures and a projected profit-and-loss (P&L) 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 put the business into context. However, it must still be accurate.
Section 1: Monthly Sales Figures
The SBA requires that you fill out the last three available years of sales history. You must enter monthly sales figures for each of the three years on the form.
Filling out the sales figures can take some time, but it’s an important step in establishing the impact of the disaster on the business’s bottom line. 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.
You’ll know that a detail is worth noting if you have:
- Unusually high or low sales in a given month
- Months with no sales
- Steady decline across the years
- Anything else that looks unusual
The key thing to remember when applying is that the person reviewing your application only sees the numbers. They don’t know about your lucky break in February of last year that caused sales numbers to temporary spike or about street construction six months earlier that slowed foot traffic into your business. Noting these anomalies help put your application and sales figures in context and improve 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 are not required to use the provided template to outline your forecast. However, if you are completing the application on your own, we recommend using the SBA’s template.
First, you’ll need to provide for the projected period affected by the disaster 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; sometimes, however, 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: Salaries paid to the owners of the business and C-suite executives.
- Employee wages: Hourly wages, tips, commissions, and other forms of compensation paid to employees.
- Fixed and variable costs: 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 less.
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 will need to be explained in the next section.
Section 3: Additional Information
This is one of the few opportunities that you have to explain the details of both your sales figures and your projections. The notes you’ve been taking throughout this process all belong here. If you 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 loan application. Explain your reasoning for the numbers to 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.
Bottom Line
SBA Form 1368 is required for an EIDL and MREIDL application. When completing it, you must provide monthly sales figures and projected P&L 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.
