(This article covers Economic Injury Disaster Loans (EIDLs). Read our explainer on Paycheck Protection Program (PPP) loans.)
UPDATE MAY 8: The S.B.A. reduced the maximum loan amount from $2 million to $150,000 and will now only accept EIDL applications from agricultural businesses. If you’ve applied previously, prior to April 15 —when the application portal closed—you’ll be reviewed on a first-come, first-served basis.
UPDATE APRIL 29: Funding for this program has been exhausted and the S.B.A. is no longer accepting new applications. Applications that have already been submitted are being processed on a first-come, first-served basis.
As we all do the best we can to protect our communities from the coronavirus (COVID-19) pandemic, daily life is changing due to social distancing and lockdown in many cities. Measures like these, though necessary, inevitably damage the American economy, with small businesses hit especially hard. To mitigate the economic effects of the disaster, the federal government has announced a series of measures including offering affected small businesses low-interest loans of up to $2 million.
Who is Providing the Small Business Assistance?
Loans will be provided by the U.S. Small Business Administration (SBA), who have long issued fully federal-funded Economic Injury Disaster Loans (EIDL) to businesses in communities affected by natural disasters and similar emergencies. SBA chief Jovita Carranaza confirmed that the SBA “will work directly with state Governors to provide targeted, low-interest disaster recovery loans to small businesses that have been severely impacted by the situation.”
Who Can Apply for a Coronavirus Small Business Loan?
This program is designed to help small businesses (and small agricultural cooperatives) who have suffered substantial economic loss due to the pandemic. An important qualification is that these businesses must be unable to secure alternative funding. Businesses cannot apply independently—first, local county and state officials must work with the SBA to declare a disaster in their area. Only then will businesses have the opportunity to seek these emergency funds.
How Can These SBA Loans Help?
The coronavirus (COVID-19) pandemic will strain small businesses in many ways. When towns and cities go into lockdown, small businesses—like restaurants and retail— who operate with the narrowest of profit margins at the best of times will be hit hardest. Businesses will experience supply chain failures, reduced sales or even enforced temporary closure. To help combat these challenges, small business loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid due to the result of the pandemic.
What are the Terms of These Loans?
While the specific terms and conditions are dependent on a company’s ability to repay, the repayment period cannot exceed 30 years. For small businesses the interest rate is set at 3.75%; for nonprofits it is 2.75%.
Coronavirus Small Business Loan Application Process
Here’s how small businesses can apply for an EIDL:
- Those affected can describe their losses
- A territory must declare a disaster
- The SBA will then issue an Economic Injury Disaster Loan declaration
- Work in partnership with the SBA
Eligible small businesses must complete an Economic Injury Worksheets detailing the economic losses they have suffered due to the coronavirus. To download the relevant form for their region, and find out to whom it must be submitted, the first place businesses should look is the official website for their specific county.
Counties can collect these Economic Injury Worksheets and submit them to the relevant state authorities. If enough counties submit forms, the governor of a state or territory may then officially declare a disaster.
With the authority granted by the Coronavirus Preparedness and Response Supplemental Appropriations Act, the SBA then has the authority of offer loans to those affected.
At this point, eligible communities will be informed of how they can access these loans.
For more information on the application process, visit the Small Business Administration website. Though the urgency of the situation may prompt an expedited process, applications for EIDL have historically taken weeks or months. You may also want to investigate the option of a SBA 7(a) loan, underwritten by the organization but provided by an approved network of lenders.
Paycor Can Help
Paycor gives small business leaders the technology and expertise they need to better manage their people and to face challenges with more confidence. To learn more about Paycor, contact a member of our sales team.
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