Companies of every size are navigating new and unexpected challenges as they adjust to life after the widespread outbreak of the coronavirus (COVID-19.) But small businesses are particularly impacted by these challenges, since they often don’t have the same financial and employee resources as their larger counterparts. If the difficulties associated with running a small business during the pandemic sound familiar, you should know that relief through the Small Business Administration (SBA) is available.
Extended loan criteria
The SBA announced that it now offers Economic Injury Disaster Loans under the newly signed Coronavirus Preparedness and Response Supplemental Appropriations Act.
What does this mean for you? The governor of each state or territory submits a request for Economic Injury Disaster Loan assistance to the SBA. The agency’s Office of Disaster Assistance then collaborates with the governor to approve the request. Once the request is approved, small businesses within the state gain access to the information needed to apply for loan assistance.
To further expedite things, the SBA has extended the criteria required for a disaster loan. States and territories can request assistance by certifying that at least five small businesses have experienced substantial economic injury anywhere within the state. Prior to the pandemic, at least one of the companies needed to be in each of the disaster-declared counties or parishes.
Similarly, once the submission process is complete, Economic Injury Disaster Loans will be available anywhere in the state. The previous criteria only allowed businesses in counties identified as disaster areas to access financial assistance. But given the widespread and economically significant impact of COVID-19, most states will be granted approval within a few months.
Loan terms and amounts
Economic Injury Disaster Loans offer small businesses up to $2 million in financial assistance, which can be used to help offset revenue loss caused by the pandemic. This money can also be used to help pay overhead costs such as rent and utilities, keep up with accounts payable, and cover employee payroll.
The interest rate on these loans is 3.75%. Some nonprofits may also be eligible for financial assistance at a lower interest rate of 2.75%. Specific loan terms will be determined by the borrower’s ability to pay back the loan, although the agency does say that it “offers loans with long-term repayments in order to keep payments affordable.”
Managing loss and preparing for the future
It’s important to remember that a loan is only one form of financial relief offered by the SBA. Small businesses may also be eligible for additional loans, as well as training programs that may benefit you or your employees.
Our firm is here to help you accurately assess your financial standing and develop a strategy for navigating the coronavirus crisis successfully—including managing risks and mitigating future losses. Please reach out to your trusted Smolin professional with any questions or concerns.