Disaster Relief for Small Businesses Struggling under COVID-19
Small Businesses and non-profits everywhere are currently experiencing significant losses in revenue due to the Coronavirus pandemic. The U.S. Small Business Administration (SBA) has for years issued Economic Injury Disaster Loans (EIDLs) to small businesses and non-profits in need of economic assistance after a physical disaster like an earthquake or flood, and is now offering EIDLs as part of the federal government’s coordinated response to COVID-19. Small businesses and private non-profit organizations that are currently struggling should consider seeking disaster relief under the EIDL program.
Under the Coronavirus Preparedness and Response Supplemental Appropriations Act that President Trump signed into law on March 6, an EIDL declaration issued by a state's or territory's Governor triggers the SBA's loan program in that jurisdiction. To date, New York, Ohio, and Pennsylvania have all made such declarations, making SBA loan relief available to small businesses and non-profits in our area.
Under an EIDL, the SBA offers offer up to $2 million in assistance to pay fixed debts, payroll, accounts payable, and other business expenses that the borrower cannot pay due to COVID-19's impact. The interest rate is 3.75% for small businesses and 2.75% for non-profits, with long-term repayment plans available, up to a maximum of 30 years, to keep payments affordable. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
Note that EIDLs are distinct from SBA-guaranteed loans under the new Paycheck Protection Program, created by the Coronavirus Aid, Relief and Economic Security (CARES) Act passed last week by the House and Senate and signed into law by President Trump on Friday, March 27. Small businesses and non-profits with EIDLs issued between January 1, 2020, and the date that CARES Act loans become available may refinance and consolidate its EIDL into a single Paycheck Protection Program loan. To learn more about SBA Loans under the CARES Act, please click here for our alert regarding the Paycheck Protection Program.
If your small business or non-profit organization needs financial assistance and you're considering an SBA loan under either the Economic Injury Disaster Loan program or Paycheck Protection Program, please contact one of the attorneys in the Business Transactions group at our firm.