On March 12, 2020, the U.S. Small Business Administration (SBA) announced that it will be offering federal disaster loans for working capital to small businesses that have sustained impacted substantial economic injury as a result of the coronavirus (COVID-19). The SBA will work with state governors to identify territories that have been severally impacted and provide targeted, low-interest loans to help small businesses cope with a temporary loss of revenue.
Upon receipt of a request from a state’s or territory’s Governor, the SBA will issue an Economic Injury Disaster Loan (EIDL) declaration pursuant to authority granted by the recently-enacted Coronavirus Preparedness and Response Supplemental Appropriations Act. That declaration will make loans available to small businesses and private, non-profit organizations in designated areas of the state or territory.
After an EIDL declaration is made, information on the application process will be made available to the affected communities. Loans will be available to small businesses without credit available, however, businesses with access to other sources of credit are not eligible for assistance. Qualifying small businesses will be able to apply for up to $2 million in assistance to help cover fixed debts, payroll and other obligations that can’t be paid because of the impact of COVID-19 on revenue. The loan amount will be determined based on an applicant’s actual economic injury and financial need. Interest rates will be 3.75%, or 2.75% for non-profits, and repayment terms (up to a maximum of 30 years) will be determined on a case-by-case basis, based upon a borrower’s ability to repay.
The level of funding available in this EIDL program is expected to more than double the total disaster relief lending by the SBA in the past year.
A handful of localities have already begun collecting voluntary information from businesses to document the economic impact of COVID-19 in support of an EIDL declaration by the SBA. Small business owners are advised to check county and state websites for further instruction.
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