SBA Economic Injury Disaster Loans available to small businesses and private non-profits
As of March 20, 2020, the U.S. Small Business Administration (SBA) has approved an Economic Injury Disaster Loan Declaration for all of Oklahoma’s 77 counties to help alleviate the economic injury suffered by your small business or private non-profit. If your small business or private non-profit has been negatively impacted due to COVID-19, you may now apply for an SBA Economic Injury Disaster Loan.
An SBA Economic Injury Disaster Loan is a long-term low interest loan offered by the SBA to assist small businesses and private non-profits that have suffered substantial economic injury as a result of a declared disaster (in this case, COVID-19). Substantial economic injury means the business is unable to meet its obligations and to pay ordinary and necessary operating expenses. Most private non-profit organizations and small businesses, as determined by the SBA size standard corresponding to the business’ NAICS code, will qualify.
The interest rate on these Economic Injury Disaster loans is 3.75% for small businesses and 2.75% for private non-profits. The repayment term will be determined on a case-by-case basis and can be up to a maximum of 30 years, and payments will be deferred for the first 12 months. In most cases one-half of the prior year’s gross profit, up to $500,000, will be available to help your business overcome the temporary loss of revenue. If more than $500,000 is needed, certain businesses may qualify for up to $2 million in assistance. Collateral, to the extent available, will be required for loans in excess of $25,000.
The loan proceeds are available for working capital needs related to business operations. This includes fixed debt payments, payroll, accounts payable, and other bills that cannot be paid because of the impact of COVID-19. Borrowers should maintain receipts tracking the use of loan proceeds for three years in case of an audit.
The loan application process is being handled virtually through the SBA website. In connection with the application (SBA Form 5), the SBA will run a credit check and will require certain additional information to be submitted. The SBA has not said what minimum score is required to qualify, but it is anticipated that most businesses will qualify. There is no fee to apply and no obligation to accept the loan if approved. Historically, loans have been processed as quickly as three days with funds available within 30 days as a single lump sum deposit.
If you are interested in applying for an Economic Injury Disaster Loan, visit the SBA website to review the application and additional information including the SBA Size Standard Table and a list of required submissions.
If you would like additional assistance, please contact a member of the McAfee & Taft Business Transactions and Finance Practice Group.