Businesses Are Urged to Apply For “Economic Injury Disaster Loans” Now
The United States Small Business Administration (SBA) has announced a new lending program to assist small businesses and private, non-profit businesses as well. Under the new program, the SBA offers “Economic Injury Disaster Loans,” in amounts up to $2 million. These loans can provide vital economic support to small businesses to help overcome the temporary losses of revenue they are experiencing.
These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%. In order to keep payments affordable, the SBA offers loans with repayment terms up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
How to Apply For An SBA Disaster Loan
Businesses can find more information about the SBA disaster loan program online. Businesses may apply for a loan online as well or download and submit a paper form. It will take the SBA at least three weeks to review a completed application.
The information required to complete a loan application includes information about the real estate out of which your business is operating, your insurance policies and usual and customary financial information about your business (e.g., income, account balances and monthly expenses).
Fair warning: The SBA’s website is slow, presumably due to the unusually high volume of inquiries to the site. In addition, the government is taking at least three weeks to review a loan application.
Business leaders are encouraging small businesses to act now to seek to obtain a loan under the new SBA program. Given the uncertainty that our economy faces as a result of the novel coronavirus, waiting and hoping for the best is ill-advised.
Some have inquired about whether government aid programs for small businesses hurt by the coronavirus will include forgiveness of loans. The answer right now is no. There has been some talk of loan forgiveness, however, in at least two places: President Trump has stated that he wants to work with Congress to provide relief to small businesses that could include certain loan forgiveness; and, as Congress struggles to pass a comprehensive coronavirus aid package, one of the sticking points is whether to forgive student loan debt.
In addition to help under the SBA’s new program, other sources of capital are available.
Pennsylvania Assistance for Small Businesses
Pennsylvania Governor Tom Wolf announced on March 25, 2020, a new program for small businesses hurt by the COVID-19 pandemic. The program would provide loans for working capital needs of affected businesses in principal amounts up to $100,000. The rate of interest on the loans will be 0%. The principal of the loans must be repaid during the first three years after the loan is made. Payments would be based on a level monthly payment as if the term of the loan were 12 years, with the full unpaid balance due on the third anniversary of the loan closing.
Small businesses interested in a loan under the new program can obtain more information here: COVID-19 Working Capital Access Program
To discuss these sources of capital for your business, please contact an attorney at The Lynch Law Group.