Small businesses are now eligible for up to $2 million in Economic Injury Disaster Loans from the Small Business Administration (SBA) after President Trump called for an additional $50 billion in funding to the SBA’s lending program from Congress in response to COVID-19. While the $50 billion has not yet been approved, the SBA is able to issue an Economic Injury Disaster Loan declaration thanks to the Coronavirus Preparedness and Response Supplemental Appropriations Act recently signed by the president.
These low-interest loans may be used to pay fixed debts, payroll, and accounts payable that cannot be paid as a result of the virus outbreak at an interest rate of 3.75% for small businesses without available alternate credit, and 2.75% for nonprofits. Businesses with available credit are not eligible. While up to $2 million is available per business, the SBA will determine the amount based on “your actual economic injury and your company’s financial needs, regardless of whether the business suffered any property damage.”
Businesses must be located in designated states and territories where ‘substantial economic injury’ has occurred or is occurring as a result of the Coronavirus. The state or territory’s governor must submit a request for the SBA to issue an Economic Injury Disaster Loan declaration for their area. Currently, Kansas and 28 other states and the District of Columbia have been declared SBA disaster areas due to COVID-19.
Small business owners are reminded that applications will be processed in the order received, and so it is best practice to submit as soon as possible as relief will not be immediate. The SBA’s goal is to make decisions on applications within 2 to 3 weeks and, upon approval, issue $25,000 within 5 days. With high demand, however, processing times will likely increase.
To find out if your state is an SBA-declared disaster area and to get a loan application, visit https://disasterloan.sba.gov/ela. You must be located in an SBA-declared disaster area to be eligible for the SBA disaster loan.
Call Goering & Granatino for assistance with your SBA loan application.