As the ramifications of the coronavirus outbreak continue to unfold, we are beginning to realize the cost of supporting those out of work due to quarantines and shutdowns. While the CDC and other health organizations believe the protective measures are necessary, they do come with a hefty price tag. Thankfully, the government recognizes this. In response, various administrations are strategizing ways to ease the financial burden that has recently been placed on individuals and companies. Therefore, the U.S. Small Business Administration (SBA) has decided to offer low-interest federal disaster loans to applicable businesses.
Here is what small business owners need to know about the loans.
The U.S. Small Business Administration
Now, the purpose of the U.S. SBA is to protect the interests and advocate on behalf of small businesses. The SBA also provides assistance in the following ways when a company experiences a major disaster:
- business development
So, as the coronavirus has spread and we are seeing an increase in temporary business closures, the SBA aims to protect those who are taking a proactive stance in fighting this outbreak. Hence, the decision to provide federal disaster loans.
Federal Disaster Loan Eligibility
First, it’s important to note that not just any business can run out at the moment and receive a low-interest federal disaster loan. In fact, before an individual company can be approved for the loan, the state or territory’s governor must first make the request by claiming substantial economic injury. Then, after reviewing the governor’s plea, the SBA will use its best judgement based on the conditions outlined in the Coronavirus Preparedness and Response Supplemental Appropriations Act to determine whether the state is eligible to receive federal disaster funds. Finally, if the SBA approves the request, the state will issue an Economic Injury Disaster Loan declaration.
So, those considered eligible for the loans include are those in a designated disaster state who are one of the following:
- small business
- Private, non-profit organizations
Companies can find out if their community is eligible for assistance by visiting SBA.gov/disaster.
Terms of the Federal Disaster Loan
Besides the fact that the federal disaster loan provides assistance to companies during this trying time, the terms of the loan are also favorable to those eligible. The following terms are included as part of the Economic Injury Disaster Loan:
- Up to $2 million in assistance to provide temporary relief for lost revenue
- Permission to use funds for business expenses such as payroll, accounts payable, and other fixed debts
- A low interest rate of 3.75% for small business, and 2.75% for non-profit organizations
- Affordable repayment options, up to a maximum of 30 years
Still, applicants should know that funding will be approved on a case-by-case basis. Furthermore, the recipients of the loan should be aware that they are to use the funds for expenses that cannot be paid due to the coronavirus outbreak.
Federal Disaster Loans are the Relief to Recover
While this package isn’t perfect, the Economic Injury Disaster Loan is intended to provide relief to small businesses. So, the immediate relief is in order for them to cope for the time being, and eventually recover once the spread of the virus slows. If businesses are able to remain afloat, then individuals will also be able to maintain their livelihoods.
Therefore, expect to potentially see details for federal disaster loans and other relief adapt to the changes that will inevitably occur over the course of this outbreak. All organizations are working together to protect the interests of businesses and individuals alike.
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This is not meant to provide legal counsel or advice. Every situation is different. Please contact an HR professional or employment attorney before taking any action.
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