Economic Impact Disaster Loans Available from SBA Nationally: What Your Small Business Needs to Know

March 2020

As of Friday, March 20, 2020, the U.S. Small Business Administration (the “SBA”) has made an Administrative Declaration of an Economic Injury Disaster due to the Coronavirus (“COVID-19”). This means that small businesses are now eligible to receive Economic Impact Disaster Loans (“EIDL”) from the SBA in all 50 states and the U.S. territories. A “small business” also can include small agricultural cooperatives and most private nonprofit organizations.

SBA EIDLs are intended to help small businesses who have or will suffer a substantial economic injury in a declared disaster area. Substantial economic injury means the business is unable to meet its obligations and to pay its ordinary and necessary operating expenses. EIDLs provide the necessary working capital to help small businesses survive until normal operations resume after a disaster. This includes payment of expenses such as payroll, rent, contractual vendor payments, and other bills that cannot be paid because of the disaster’s impact.

Here are the top 10 things you need to know about SBA EIDLs:

  1. The SBA can provide a maximum loan amount of $2 million disaster assistance. There is no loan minimum.
  2. You can apply for a SBA EIDL online or submit a paper application by mail to the SBA. As of now, applications for a SBA EIDL are made directly to the SBA and not through a traditional lender.
  3. There are no fees for the SBA EIDL application; fees are limited to the costs related to the perfection of collateral.
  4. The interest rates for small businesses and small agricultural cooperatives without credit available elsewhere will be 3.750%, and the interest rates for most non-profits without credit available elsewhere will be 2.750%.
  5. The term of the loan is determined on a case-by-case basis but cannot exceed 30 years.
  6. SBA will determine an appropriate installment payment based on your financial condition.
  7. The proceeds of the loan must be used to keep the business operating through the disaster period.
  8. Loan collateral requirements may vary based on the size of the loan and creditworthiness; however, loans $25,000 or less will have no collateral requirement.
  9. You do not need an existing SBA loan to apply for a SBA EIDL.
  10. The loan application deadline date will be December 21, 2020.

The online application is the fastest method to receive a decision about your loan eligibility. For a successful application, you must submit the completed SBA loan application and a signed and dated IRS Form 4506-T giving the IRS permission to provide SBA your tax return information. FMJ can help with any questions you may have regarding the SBA application process.

If you have an existing SBA loan and are concerned with your ability to make payments, many SBA lenders are looking for opportunities to assist their customers who may suffer economically from the current crisis. During these crisis situations, SBA lenders may independently authorize and grant payment deferments and modify loans in certain circumstances. FMJ can help with any questions you may have regarding your ability to modify or defer your existing loan payments for your SBA loan or other financing.

The FMJ team is prepared and available to assist you with your SBA applications or your existing SBA loan. We are here to answer any questions and to provide assistance with any other needs you may have.

If you have questions about the above article or specific questions about SBA loans, please contact attorneys Jordanne Kissner at jordanne.kissner@fmjlaw.com, Nate Brandenburg at nathan.brandenburg@fmjlaw.com, or Kevin Johnson at kevin.johnson@fmjlaw.com.