On March 13, the U.S. Small Business Administration (SBA) announced that low-interest disaster recovery loans of up to $2 million will be available to businesses affected by the COVID-19 crisis. These Economic Injury Disaster Loans (EIDL) provide term loans that are intended to support the working capital needs of businesses affected by COVID-19. The EIDL program provides only term loans, not lines of credit.
To be eligible, businesses must be located in a declared disaster area. The SBA has declared all fifty states, Washington D.C., Guam, Virgin Islands, Puerto Rico, Northern Mariana Islands, and American Samoa as disaster areas, meaning that eligible businesses from these areas may apply.
Agricultural enterprises, casinos, and companies in the cannabis industry may not be eligible to obtain SBA Loans. In addition, religious and charitable organizations may also be ineligible, although some non-profit organizations will be able to obtain these loans.
Funds can be used to pay fixed debts, such as bank loans, payroll, accounts payable, and other bills. Loans are not intended to support growth initiatives, investment, or other non-working capital needs. Loans will be offered with terms of up to 30 years and interest rates of 3.75 percent for small businesses and 2.75 percent for non-profit organizations. While all applicants must prove the crisis has hurt their business, details of individual loans will be determined on a case-by-case basis. Generally, loans will be awarded to companies that do not have access to other funding.
To further help organizations affected by a disaster, the SBA is offering some deferment options. The SBA will automatically defer existing SBA disaster loans through the end of the 2020 calendar year. In addition, new EIDLs will allow for one-year deferments. During any deferment, interest will continue to accrue.
To apply, businesses should visit SBA.gov/disaster. During this time, there is likely to be a great deal of traffic on the SBA website; it might load slowly or even crash periodically. The SBA is recommending applicants access the site during non-peak hours, from 7:00 PM to 7:00 AM.
Electronic applications are encouraged. There are no fees for the application process. Applicants will need to complete the SBA Loan Application (Form 5) and submit an IRS 4506-T (tax return release). Applicants should consider having recent federal income tax returns, personal financial statements, schedules of liabilities, financial statements, deed/lease information, and their employer identification number (EIN) available.