Federal Disaster Loan Assistance Program for Small Businesses Impacted by COVID-19

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Authored by: John Shire, Aselle Kurmanova, Marcantonio Barnes, and Juan Reyes

Background

On March 12, 2020, in response to President Trump’s address to the nation and the signing of the Coronavirus Preparedness and Response Supplemental Appropriations Act (the “Act”), the Small Business Administration (SBA) Administrator, Jovita Carranza, issued a statement announcing the SBA’s disaster assistance loan program for small businesses impacted by the novel Coronavirus (COVID-19), citing the vital role that small business play in driving the economic engine of this country, with the goal of supporting small business with up to $2 million US in loss of income protection.

The mechanism for relief will be for the SBA to directly offer designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the COVID-19. Upon a request received from a state’s or territory’s Governor, SBA will issue loans under its own authority, as provided by the Act.

The President has declared most areas affected by the COVID-19 pandemic to be federal disaster areas -- small business owners are eligible for Economic Injury Disaster Loans in the areas identified here.

Eligibility and Assistance

Economic Injury Disaster Loans are available to small business owners who meet certain eligibility requirements under the Disaster Loan Assistance Program. Small businesses affected by an economic injury disaster and without credit available elsewhere can apply for loan assistance for as much as $2 million US, at a rate of 3.75%. For non-profits, the interest rate is 2.75%.

SBA determines an applicant’s ability to obtain credit elsewhere by evaluating whether an applicant has sufficient cash flow and assets to borrow private sector funds, without incurring undue hardship. Businesses with credit available elsewhere are not eligible for the Disaster Loan Assistance Program.

The proceeds of the loan may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. Repayment options can extend up to a maximum of 30 years, based on an applicant’s ability to pay.

Process

The SBA Loan Application and instructions are available to be completed online at this address.

Small businesses seeking to apply for Economic Injury Disaster Loans can learn more about these loans at this address.

Additional forms that small business owners may be required to complete for a loan application are available here. 

Comment

The SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response to COVID-19. We are tracking all developments for business financial assistance, as well as all legislative updates for the provision of federal response funds.