As many small businesses encounter cash flow and credit concerns due to Coronavirus (COVID-19), there are several U.S. Small Business Administration (SBA) loan programs available to provide assistance. Small business owners located in Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, and West Virginia may visit the SBA’s website and directly apply for an Economic Injury Disaster Loan (EIDL).
EIDLs are working capital loans to assist small business and non-profit organizations satisfy their ordinary cash flow requirements during disaster periods. The interest rate on EIDLs is calculated under a statutory formula and the amount borrowed generally cannot exceed $2,000,000 for a term not to exceed 30 years (the term of each loan is specifically determined by the SBA). A small business that has previously defaulted on any prior SBA loans is not eligible for an EIDL.
The SBA offers several other loan programs that are not specific to disaster relief. The U.S. Congress is actively debating making changes to one or more of these programs to assist with the current crisis. Some of the proposed changes include increasing the maximum loan proceeds available to each small business borrower under the SBA’s 7(a) loan program from $5,000,000 to $10,000,000 and increasing the maximum loan amount under the SBA’s Express program to $1,000,000, waiving all borrower and lender guarantee fees, and a partial loan forgiveness feature tied to payroll and debt costs during the disaster period. One issue to consider is that at least one of current proposals will not allow small businesses that obtain an EIDL to also receive the improved benefits of the SBA’s other programs.
Since no legislation has yet been adopted, it is difficult to confirm what changes will be made. If a small business does not need immediate access to funds at this time, it might be prudent to wait to see what legislation comes out before proceeding with an EIDL.