The U.S. Small Business Administration (SBA) recently designated the Coronavirus (COVID-19) pandemic as a disaster qualifying for its Economic Injury Disaster Loan Program in states and territories approved by SBA through a disaster declaration (Disaster Declaration) after requests by a state's or territory's Governor. This program makes available, fixed-rate, low-interest loans of up to $2 million to small businesses and non-profits that have been "severely impacted" by the coronavirus pandemic.
Disaster Declarations Issued For All States as of March 21st
As of March 21st, the SBA had issued Disaster Declarations for all 50 U.S. states, the District of Columbia and all US Territories, making economic injury loans available to small businesses and private, non-profits throughout the United States. See SBA State Disaster Declarations.
SBA Disaster Loan Terms Actual loan amounts are based on the amount of economic injury due to the disaster during the "incident period" (beginning Jan. 31st and continuing). Terms are determined on a case-by-case basis, based upon each borrower's ability to repay, but include:
| Eligible Businesses | Small businesses and private, nonprofits |
| Borrowing Amount | Maximum of $2,000,000 |
| Term Lengths | Up to 30 years |
| Interest Rates | Fixed Rate 3.75% (2.75% for nonprofits) |
| Use of Proceeds | Payment of fixed debts; Payroll; Accounts Payable; Payment of other bills impacted by COVID-19 |
Small Business Eligibility To qualify, an applicant must meet SBA's small business size standards and verify that applicant cannot obtain credit from other sources without causing an undue burden – the "Credit Elsewhere" test, as well as satisfy certain credit, collateral, background and financial information requirements.
Size Standards: Determining whether an entity is a small business is a fact-intensive inquiry and based on small business size standards, which vary by industries and measured by average annual revenues or number of employees. With respect to economic injury loans, an applicant must satisfy two criteria: (1) size of the applicant alone (without affiliates) must not exceed the size standard designated for the industry in which the applicant is primarily engaged; and (2) size of the applicant combined with its affiliates must not exceed the size standard designated for either the primary industry of the applicant alone or the primary industry of the applicant and its affiliates, whichever is higher.
The SBA's size standards may be accessed online here: Size Standards Per NAICS Codes
For certain NACIS codes, the SBA's size standard threshold may also be met by the number of employees for a company in a specific industry. For purposes of this factor, SBA counts all individuals employed on a full-time, part-time, or other basis, including employees obtained from a temporary employee agency, professional employee organization or leasing concern.
Check to see if your business qualifies at: SBA's Size Standards Tool
Credit Elsewhere Test: Small businesses with ability to obtain credit available elsewhere are not eligible for the Disaster Loan. SBA requires an SBA lender to certify or otherwise show that the desired credit is unavailable to the applicant on reasonable terms and conditions from non-Federal sources without SBA assistance, taking into consideration the prevailing rates and terms in the community in or near where the applicant conducts business, for similar purposes and periods of time. As part of the Credit Elsewhere test, SBA requires the personal resources of any owner of 20 percent or more of the small business applicant be reviewed. This rule also applies to each person when the combined ownership of the spouses and dependent children is 20 percent or more.
Other Disaster Loan Requirements: An applicant must meet certain credit history requirements acceptable to the SBA; however, the SBA will consider extenuating circumstances caused by the Coronavirus pandemic. Loans greater than $25,000 require collateral. The SBA reviews a financial statement for each owner and one for each partner, officer, director and stockholder owning twenty percent (20%) or more of the applicant. Individuals who own 20% or more of the loan applicant must personally guarantee repayment of the loan and in some instances secure the loan by pledging additional collateral.
Applicants may apply online, receive additional disaster assistance information and download applications at Online Application.
Completed applications can also be mailed to U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
Applicants may also call SBA's Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov for more information on SBA disaster assistance. For the hearing impaired, call (800) 877-8339.
The deadline to apply for an Economic Injury Disaster Loan is Dec 21, 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
