Coronavirus (COVID-19) has been classified as a disaster. The U.S. Small Business Administration (SBA) provides Economic Injury Disaster Loans (EIDLs) to provide working capital to small businesses to meet their ordinary and necessary financial obligations that, resulting from a disaster, are unable to be met. A full list of states and counties that qualify for an EIDL under the COVID-19 declared disaster can be found at https://disasterloan.sba.gov/ela/Declarations/Index. A business must meet The SBA’s small business size standard must be met to apply, which is set by industry, based on NAICS code. In addition, for some industries, the size standard is based on revenue and for some industries it is based on number of employees.
Program highlights include:
- Businesses impacted by COVID-19 currently have until December 21, 2020 to apply
- Loan amounts up to $2 million for working capital
- Loan amounts are awarded based on need, client employee count and industry and is based on the working capital need to cover necessary expenses (not on the lost revenue), net of insurance or other business recoveries
- Interest rate is 3.75% (2.75% for non-profits) with terms up to a maximum of 30 years; initial payments are deferred for one year with no penalty for early payoff of loan
- Loans may not be used to refinance existing long-term debt
- Eligibility – show economic injury (loss of sales, anticipated loss of sales (e.g. contract cancelled)
- A credit check will be performed
- The loan may require the personal guarantee of those who own 20% or more of the applicant business
- Collateral includes general security interest in accounts receivable, inventory, equipment and or real estate
- For any applicants that have existing disaster loans (e.g. from 9/11) – payments are deferred for the remainder of 2020 – no application for deferral is needed.
- Businesses don’t have to be in business for a year (i.e. new acquisition and start up that has a little track record can apply)
- The application is done on-line
See the SBA Disaster Relief Loan Guide for specifics about the program.