U.S. Small Business Administration Offers Loans to Small Businesses for Coronavirus Relief

The U.S. Small Business Administration is offering economic injury disaster loans in affected states to provide working capital to small businesses for Coronavirus-related economic disruptions. 

The loans are available to “small businesses, small agricultural cooperatives, small aquaculture businesses and most private nonprofit organizations,” in declared-disaster areas, which includes all of New England, according to a phone conference presentation by the Small Business Administration on Tuesday. 

The presentation was part of a Coronavirus special topic conference call series sponsored by the U.S. Department of Commerce in partnership with the Connecticut District Export Council. 

“The number one message to small businesses is there is help out here,” said Amy Bassett, district director of the Small Business Administration Maine district office, who led the session with Diane Sturgeon, deputy district director of the office.

The SBA’s definition of a small business varies by industry and is calculated either by the average annual receipts or the number of employees. 

Basset said the intent for the economic injury disaster loans, also known as EIDLs, is to provide working capital for businesses impacted by COVID-19.

“The loans are intended to help businesses cover payroll, fixed debt payments, accounts payable, rent, utilities and other bills that could have been paid had the disaster not occurred,” she said. “The loans are not intended to replace lost sales or profits or for expansion. It is not designed for refinancing debt, purchasing equipment or purchasing a business.”

Eligible entities may qualify for loans up to $2 million. The interest rate is 3.75 percent for small businesses and 2.75 percent for nonprofit organizations, with terms up to 30 years. … Interest rates are fixed for the life of the loan. Loans above $25,000 require collateral.

“In order to apply, the business has to be able to demonstrate it has been directly impacted by this disaster,” said Bassett. “The business must show that their industry has been impacted and that they’ve been harmed by the losses in their communities.” 

Unlike other SBA loans made through a bank, this is a direct loan from the SBA through the U.S. Treasury Department, explained Bassett.

“The loan is based on repayment ability so once application is received SBA is going to determine the applicant has ability to repay that loan,” she said.  “This loan is projecting out expenses through the disaster period to determine the loan amount.”

There is an automatic 12-month deferment period before any payments are due, although interest does accrue during that time. 

“That deferment period is designed to give businesses extra time to recover and get back on their feet in order to be able to make the payments,” she said. 

The business must have a physical presence that is “tangible and significant” in the declared disaster area. Economic presence alone or merely having a P.O. Box in the disaster area would not qualify as a physical presence. 

There is no cost to apply and there is no obligation to take the loan if offered. Applicants can have an existing SBA Disaster Loan and still qualify for an EIDL. 

Religious organizations and charitable organizations are not eligible for the EIDL, nor are gambling concerns including casinos and racetracks. 

The applicant can ask for more than offered. Once the loan is dispersed, the applicant can return in six months to request additional assistance. If the loan request is not approved, the applicant has six months to provide additional documentation to ask for reconsideration. Applicants can also defer the loan for six months once the loan is approved. 

On March 17, the Small Business Administration issued revised criteria for states seeking economic injury declaration that relaxed the previous requirements and made assistance available statewide as opposed to specific counties identified as disaster areas.