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COVID-19: SBA loans, state options and what you need to know

The Corona Virus is causing chaos and problems for all of us, whether it’s our home life and family, our leisure activities for our working environment. The economy is being hit as events are canceled, people are advised not to travel or gather in numbers, and many businesses are unsure of what to do for the best. Some are hit harder than others of course, and there is a move now to work out how best to help people to survive until this pandemic is contained.

Get sub-prime lending from the government for business owner’s corona relief
On March 12, the Small Business Administration announced that it is to provide disaster assistance loans for small businesses impacted by Coronavirus (COVID-19). The SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance for a small business. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.

Process for Accessing SBA’s Coronavirus (COVID-19) Disaster Relief Lending

  • The U.S. Small Business Administration is offering designated states and territories lowinterest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.
  • Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available to small businesses and private, non-profit organizations in designated areas of a state or territory to help alleviate economic injury caused by the Coronavirus(COVID-19).
  • SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
  • Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities.
  • 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. 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%.
  • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
  • SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.

According to HR professional, Riia O’Donnell, in an editorial piece she wrote for Zendesk, what all of this equates to is a “two-fold plan to:

  • Provide small business loans to organizations impacted by economic slowdown as a result of the coronavirus.
  • To provide an immediate, 3-month tax holiday for businesses.”

“Trump has instructed the Small Business Administration (SBA) to “provide liquidity to states and small business owners” with low-interest loans and has asked Congress to increase funding to the Small Business Administration by $50 billion. That level of funding will provide the SBA with more than double the amount of loans it made in fiscal year 2019. The loans will help SMBs meet payroll; stay liquid during drops in customer demand or delayed payments; and look for alternatives or manage supply chain issues.

“Currently, New York City and Washington state are most affected by the virus, but more locations are declaring a “state of emergency” in response to the outbreak. These declarations allow localities to access federal emergency funding.”

The fine print of the coronavirus loan program

Riia O’Donnell goes on the write:
“The SBA will provide financial assistance only to businesses that are otherwise unable to secure loan funding. Washington State Congressman Rick Larsen issued a fact sheet about the loans. The loan amount is determined by the small business or independent business owner’s actual “economic injury and financial needs.”

Interest rates for EIDL loans are set at:

  • 3.75% for small businesses
  • 2.75% for nonprofits

Loan repayment can extend up to 30 years. The SBA’s terms and conditions are determined by the business’ ability to repay the loan.

How businesses can help with the loan process

To be eligible for assistance, counties must be approved by the SBA for impact and potential relief. To do so, localities must provide the SBA with documentation supporting the economic impact of COVID-19 in their area. Many counties are already posting the Small Business Administration Estimated Disaster Economic Injury Worksheet For Businesses form on their websites to get the process started.

Small business owners should check county websites to see if the form is being made available, and to whom they should return the document. These voluntary forms help county officials and Departments of Emergency Management assess damages and the need throughout their area. County officials will submit the forms and other information to request an Economic Injury Disaster Loan Declaration.

Once approved, EIDL loan processing can begin. Additional information may also be found on county and local websites about other resources and relief being offered.

Tax holiday for businesses in wake of coronavirus

In addition to opening up loans for SMBs, Trump announced a tax holiday for businesses. The plan will allow business owners to delay paying taxes normally due on April 15 for 90 days without interest or penalty. It is estimated the tax deferral will add $200 billion to the U.S. economy, providing a boost to keep the nation moving forward. Many states and cities are considering following suit.

San Francisco Mayor London Breed announced businesses with up to $10 million in gross receipts may defer their April 30 quarterly tax payment until February of 2021 if necessary. Additional measures are being considered on the federal level to assist workers and business owners.”

Read more here:

Our Take

We are helping you make sense of these new programs and to also let you know that there may be programs offered at your state level that may have better benefits, terms, and easier to access!

To offer a little more clarity: these federal programs are of course going to receive a lot of interest because they sound great in theory. The reality of the situation could be that as these Federal programs are to be run by federal employees with the IRS overseeing terms, there are likely to be long processing times. That’s not to say don’t explore them, but be aware of the timeframes as the level of inquiries is expected to be huge.

What we recommend is to also explore the that each State has in place that often have better terms and easier processing. Feel free to reach out to us for advice. We will share more relevant information to help you navigate this pandemic as we find it.

About ENJEN CONNECTS: As you know, we are experts in providing the know-how and means to explore and obtain custom incentives and funding offers from federal, state and local governments and we’ve helped companies source more than $300M in funding to date. We know that small and large businesses are affected right now, so we’ve been gathering in information that can help businesses as they seek financial relief in the wake of the current pandemic.