In response to the coronavirus (COVID-19) pandemic affecting the small business community across the country, the U.S. Small Business Administration (SBA) is offering low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury. Substantial economic injury means the business is unable to meet its obligations and pay its ordinary and necessary operating expenses. $50 billion in funding has been set aside for the program.
SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance per small business and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The loans can be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.
Loans will be underwritten by the federal SBA program. The interest rate is 3.75% for small businesses, and 2.75% for non-profit organizations. Businesses with credit available elsewhere are usually not eligible for these loans, but they have now opened them up to where that regulation no longer applies. The loans offer long-term repayment terms in order to keep payments affordable, up to 30 years, and will be determined on a case-by-case basis based upon each borrower’s ability to repay.
While the loans are offered through a federal program, the SBA coordinates directly with state Governors to provide the loans. Governors apply to be considered a “designated state or territory” through SBA so their local businesses can receive this assistance. Once a declaration is made by SBA, information on the application process will be made available to the affected communities and updated online here.
Most states and territories are still in the process of applying to be a designated area for Economic Injury Disaster Loan assistance. As part of this process, many states are asking businesses to fill out and submit surveys on the state of their business to better understand the need in their area. The list of designated areas will continue to grow as states and territories apply and are approved. Please check www.sba.gov for updates as more states are added.
Our team is here to help you navigate these difficult and unprecedented times. We are consistently monitoring the resources available to our clients and how they can be utilized by those we serve. Please reach out to your dedicated Scheffel Boyle team member for more information.