Sustaining your small business during an economic crisis or a national disaster is hard, and the US government has started rolling out programs to help your business survive and then thrive after the crisis.
Your best source for emergency loans is the U.S. Small Business Administration (SBA). The SBA was quick to respond to the COVID-19 outbreak by approving an Economic Injury Disaster Loan Declaration for the states and territories that have been negatively impacted by the pandemic. Small businesses and private non-profits can benefit from these emergency loans.
What Is an SBA Disaster Loan
SBA Economic Injury Disaster Loans (EIDLs) are long-term, low-interest loans offered to small businesses and non-profits that have suffered economic losses due to a declared disaster. In this case, the disaster is the COVID-19 outbreak.
Substantial economic injury occurs when a business cannot meet its obligations and pay the necessary operational expenses. The loans can serve as working capital until you can resume normal operations after the disaster.
Who Qualifies for an SBA Disaster Loan
The SBA has determined a scale to measure the size of a business that corresponds to the North American Industry Classification System (NAICS) code. If you have a small business, small agricultural cooperative or a private non-profit, you will be eligible to apply for an EIDL.
For the EIDL disaster loans, your business or non-profit must be located in a disaster-declared state or contiguous county.
However, the SBA may decline EIDL assistance if it determines the small business is otherwise able to obtain credit elsewhere. In case your business has suffered physical damage, you can apply both or an EIDL and a physical disaster loan.
The total combined amount of these loans cannot exceed $2 million.
What Should These Loans Be Used for
The SBA will provide up to $2 million per loan to eligible businesses to cover your necessary and operating expenses, such as fixed debt payments, accounts payable, payroll, and other bills that the business is unable to cover because of COVID-19. The interest rate for your business will be 3.75%, while non-profits will pay 2.75% interest rate loans.
You will have a maximum of 30 years to pay back their disaster loans, however, the repayment terms will be determined by your business’s ability to repay the loan.
How Much Is the Total Fund for These Loans?
Earlier in March, during his address to the nation from the Oval Office, President Trump said: “I am instructing the SBA to exercise available authority to provide capital and liquidity to firms affected by the coronavirus.”
Based on the needs of small businesses and the increasing numbers of affected firms, Congress increased the funding of this program.
The total funds for EIDLs are estimated at $50 billion.
Tens of thousands of companies will receive the financial help they need, and yours can be one of them.
How to Apply for an SBA Disaster Loan
Applying for a disaster loan with the SBA is made simple and easy to speed up the process and get the necessary approval faster. You need to fill out your loan application as well as a dated and signed IRS Form 4506-T that grants permission to the SBA to see your tax refund information. The application can be completed online through the SBA portal.
If you would like to learn more about the entire application process steps, check this page. Subscribe to our newsletter for more of the latest news about financial assistance and other resources for small businesses.
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