Small Business Administration Announces Loan Program for Struggling Businesses
In response to the COVID-19 pandemic, the United States Small Business Administration (“SBA”) has announced a program to provide small businesses and nonprofits with working capital loans to meet financial obligations such as payroll and operating expenses. Through the Economic Injury Disaster Loan Program (“EIDL”) the SBA is providing loans starting at $25,000 with a maximum loan amount of $2 million. The actual loan amounts will be determined on a case-by-case basis by the SBA and based on the amount of economic injury as a result of the declared disaster. The loans are expected to be low interest ranging from 2.75% for nonprofits to 3.75% for small businesses with loan terms up to 30 years.
Wisconsin Governor Tony Evers has announced a disaster declaration for all 72 Wisconsin counties as a result of the COVID-19 outbreak. This is the first time a virus has caused a disaster declaration. The disaster declaration allows small businesses and nonprofits to seek relief from economic injury as a result of the disaster including EIDL loans. Additionally, small businesses and nonprofits offering services to disaster victims will be eligible for disaster loans.
EIDLs do not replace lost sales or revenue or provide support for a downturn in the economy.
Even if a small business or nonprofit has credit available elsewhere, the SBA will still review a request for an EIDL loan. The “Credit Available Elsewhere” test will be used to determine the liquidity of the small business and nonprofit. The SBA has acknowledged that even though businesses may have credit available from other sources, the EIDL loans may be attractive in these difficult times as the credit markets tighten. The SBA has directed businesses to apply as soon as possible in light of the changing landscape and regardless of a business’s ability to obtain credit by traditional means.
U.S. Small Business Administration – Disaster Assistance: https://www.sba.gov/funding-programs/disaster-assistance
If you would like to learn more about Economic Injury Disaster Loans please reach out, and we will help get you through this difficult and unprecedented moment in our state and country.