Written by Todd C. Bernhardt, Timothy Kosiek

The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses and not-for-profit organizations suffering substantial economic injury as a result of the Coronavirus (COVID-19).

The process for how the SBA issues an Economic Injury Disaster Loan (EIDL) declaration for a specific area is detailed in our article “Process for Accessing SBA's Coronavirus (COVID-19) Disaster Relief Lending.” This article focuses on who can apply and how a business or non-profit applies for a loan. It includes details on provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted March 27, that revised the EIDL program as it applies to coronavirus related relief.

How does a business qualify for an Economic Injury Disaster Loan (EIDL)?
While many factors go into qualifying for an EIDL, a primary one is that a small business has to show a loss effective January 31, 2020, to the present or future date, compared to 2019 financials.

What kinds of small businesses can apply?
Examples of eligible industries include but are not limited to the following: hotels, recreational facilities, charter boats, manufacturers, sports vendors, owners of rental property, restaurants, retailers, souvenir shops, travel agencies, and wholesalers. The CARES Act also makes EIDLs available to sole proprietors, cooperatives and ESOPs as long as they were in business on January 31, 2020

What kinds of private non-profits can apply?
Examples of non-profit organizations include: Nursing homes, food kitchens, museums, educational facilities, senior citizen centers, daycare centers, playhouses, community centers, shelters, rescue organizations, associations, etc.

How can loan funds be used?
These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can't be paid because of the disaster's impact. Eligible entities may qualify for loans up to $2 million. 

What is the interest rate?
The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.

How does a business apply for an EIDL?
Applicants are encouraged to apply online for a disaster loan. If you do not have access to a computer or smartphone, call the SBA at 1‐800‐659‐2955 for assistance.

What are the collateral requirements?
EIDLs over $25,000 require collateral. Real estate is acceptable as collateral when it is available, but the SBA will not decline a loan for lack of collateral, although it requires borrowers to pledge what is available.

How long does it take to get fund for an EIDL loan?

While it can take several weeks for EIDL loan proceeds to be disbursed, eligible businesses and organizations who have applied for an EIDL loan due to COVID-19 may request an advance on that loan, of not more than $10,000, which the SBA must distribute within 3 days. Applicants will not be required to repay advance payments, even if subsequently denied for an EIDL loan. The $10,000 grant can be used for any allowable purposes that a typical EIDL can be used for, including payroll, sick leave, rent and mortgage payments and other working capital expenses.

Can a business or organization apply for both an EIDL and a Paycheck Protection Program Loan (new under the CARES Act)?

According to the U.S. Senate Committee on Small Business and Entrepreneurship, if a business or organization has already received an EIDL unrelated to COVID-19 or receives a COVID-19 related EIDL and/or Emergency Grant between January 31, 2020 and June 30, 2020, it may also apply for a PPP loan. If the business or organization receives a PPP loan or refinances an EIDL into a PPP loan, any advance amount received under the Emergency Economic Injury Grant Program will be subtracted from the amount forgiven in the PPP. A business or organization, however, cannot use an EIDL for the same purpose as a PPP loan.

Note: Small businesses should contact their bankers or a qualified lender service provider to discuss their current loan situation and gain their perspective on SBA loans.

Small businesses can stay up to date with SBA’s ongoing assistance by subscribing to the district newsletter and using their zip code. For specific questions on the EIDL program, contact the SBA disaster assistance customer service center at +1 (800) 659 2955 (TTY: +1 (800) 877 8339) or e-mail [email protected].

Contact Baker Tilly for additional information regarding the SBA disaster relief lending program

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