The SBA’s Economic Injury Disaster Loan Program May Be Able To Help Small Businesses
If your small business has been impacted by the economic downturn caused by the spread of the COVID-19 coronavirus, the SBA’s Economic Injury Disaster Loan Program may be able to provide some financial relief in the coming days and weeks. However, at the moment, this is entirely dependent upon the state in which your business is located. Currently, state governors must apply to the U.S. Small Business Administration for an economic injury disaster declaration. After a declaration has been made for a state, the SBA will offer low-interest federal disaster loans to businesses in that state.
These loans are specifically designed to provide working capital for small businesses impacted by the spread of the COVID-19 coronavirus (and related precautionary measures), particularly by state government orders requiring the temporary closure of businesses such as bars and restaurants. Loans, which are issued in amounts up to $2 million, typically take two to three weeks from initial application to approval and another five days from approval to disbursement of funds. Interest rates are generally 3.75% for small businesses and 2.75% for nonprofits. Businesses who can obtain credit elsewhere are not eligible for the program.
In order to apply for a loan, business owners will need to visit the U.S. Small Business Administration website at sba.gov. However, visitors should know that users have reported that the website has crashed several times in the last day or so. It may be prudent to expect some delays.
As of March 17th, SBA Disaster Loans Are Available in 26 States Including New York, California, and Massachusetts
As of the publication of this article, SBA disaster zones have been declared in 26 states, including New York, California, Texas, Washington D.C., Pennsylvania, Maine, Connecticut, Colorado, Texas, Oregon, Washington, Virginia, Maryland, Massachusetts, Idaho, Maine, New Hampshire, Connecticut, Arizona, Rhode Island, Nevada, Montana, Wyoming, New Mexico, and North Dakota. Readers can see a real-time list of SBA disaster zones here.
In Ohio, where Governor Mike DeWine ordered the temporary shutdown of all bars and restaurants on March 15, local SBA offices are working with the state government to provide the facts and figures necessary to show that small businesses are suffering significant financial hardships due to the outbreak. U.S. representatives in a variety of other states, including Florida, have publically asked their state Governors to request disaster declarations from the SBA.
The SBA 7(a) Loan Program May Also Expand In Response To The COVID-19 Coronavirus Threat
Florida Senator Marco Rubio has proposed a bill that would expand the SBA (7)(a) program’s lending authority from $30 billion to $80 billion in order to assist businesses impacted by the Coronavirus threat.
In addition to expanding the 7(a) program’s lending authority, Senator Rubio’s proposal would additionally boost streamlined SBA Express Loans from a $350,000 to a $1 million maximum loan amount. It would also increase the Small Business Administration’s guarantee amount to 90% (the SBA currently guarantees between 50% to 85% of most 7(a) loans).
In contrast, Rep. Nydia Velazquez of New York has countered with a proposal that would allow the Small Business Administration to issue loans directly to businesses, sidestepping the need for private lenders. Lenders say that it would take too long for the government to issue the loans directly, citing previous issues with government disaster lending during Hurricane Katrina.
Rep. Nydia Velazquez’s proposal would allow the SBA to provide 10-year, zero-interest loans for businesses negatively affected by the COVID-19 coronavirus. These loans would be issued in amounts up to $2.5 million.
The SBA’s Coronavirus (COVID-19) assistance page can be found here.
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