COVID-19: Can My Small Business Apply for a Disaster Relief Loan?

Both the Federal and Maryland governments are rolling out programs offering low interest rate loans with favorable terms for small businesses affected by the coronavirus (COVID-19) outbreak, and each program has its own unique terms and conditions which can be difficult to navigate. Generally, these disaster relief loans are available for small businesses that cannot obtain loans at conventional banks, and the loan proceeds must be used to fund regular business operations, such as payroll, rent, and other day-to-day business operations.

U.S. Small Business Administration Economic Injury Disaster Loans

The U.S. Small Business Administration instituted its Economic Injury Disaster Loans program and it applies to all counties in Maryland, the District of Columbia, and specific counties in Delaware, Virginia and West Virginia. The specific details of the program are still being disseminated, but here is what we know so far:

The purpose of the program is to provide “Working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. These loans are intended to assist through the disaster recovery period.” The loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the disaster’s impact.

The SBA Loans provide favorable terms, including interest rates of 3.75% for for-profit businesses and 2.5% for non-profit businesses, and a maximum term of 30 years. The SBA program has limitations and eligibility requirements for small businesses. There are no upfront fees or early payment penalties for these loans. These loans are available to businesses that cannot obtain credit elsewhere, and the SBA tries to make a decision on each application with twenty-one (21) days. To provide expedited and tailored service in this time of crisis, each borrower is assigned their own loan officer for servicing of the loan. The deadline to apply for these disaster loan programs is December 21, 2020.

The State of Maryland has also formed several programs to assist small businesses with working capital during the coronavirus outbreak, and the details of these are also being disseminated.

Maryland Small Business COVID-19 Emergency Relief Grant Fund

The Maryland Small Business COVID-19 Emergency Relief Grant Fund authorizes $50 million in grants to assist small business and non-profits with business operations in Maryland. The assistance is provided for Grant assistance is intended to provide relief for bank obligations, business interruption insurance, and financial partners. These grants are up to $10,000.00 and is for businesses that are in good standing in the State of Maryland, established prior to March 9, 2020 with less than $5 million in annual revenue, and the funds must be used for working capital to support payroll expenses, rent, mortgage payments, utility expenses, or other similar expenses that occur in the ordinary course of operations. In order to qualify, the business must demonstrate financial distress or disrupted business operations, such as:

• Notices from tenants closing operations and not paying rent caused by loss of income.
• Notice of inability to make loan payments due to reduced sales, suspended operations.
• Increased cost related to COVID-19 prevention measures.
• Notice of disrupted supply network leading to shortage of critical inventory or materials.
• Other circumstances subject to review on a case by case basis.

Maryland Small Business COVID-19 Emergency Relief Loan Fund

The Maryland Small Business COVID-19 Emergency Relief Loan Fund program is set up to assist for-profit business in Maryland, and there is a total of $75 million available. The eligibility requirements are similar to the Grant Fund, but the loans can be up to a maximum of $50,000.00 with 0% interest for the first 12 months, and then 2% interest for the remaining 36 months. The minimum credit score for this loan is only 575.

Maryland COVID-19 Emergency Relief Manufacturing Fund

The Maryland COVID-19 Emergency Relief Manufacturing Fund that Maryland has created provides $5 million to help Maryland manufacturers to produce personal protective equipment (PPE) that is urgently needed by hospitals and health-care workers across the country.

The Federal government and Maryland government continue to respond to the economic havoc caused by the coronavirus. If you need are a small business owner and need assistance applying for these programs, Steiner Law Group can help. Please call (410) 670-7060 to schedule a consultation and please subscribe to our newsletter for the latest updates which are changing daily.