COVID-19: SBA Grants and Loans

Steiner Law Group and Eric S. Steiner was privileged to be able to attend a Briefing with the U.S. Small Business Administration Administrator Jovita Carranza, Office of Disaster Assistance, & SBR CEO Roundtable on Friday March 27, 2020, which provided an insider perspective on the purpose of the programs that the SBA has deployed to improve the economy. Here are couple of key takeaways from this important seminar to address the economic impact of the coronavirus outbreak and the programs that are being developed and deployed by the U.S. Small Business Administration to improve the economy.

Economic Injury Disaster “EIDL” loans

One of the most important programs that the U.S. Small Business Administration is now offering is the Economic Injury Disaster Loans, or “EIDL” loans (pronounced idol). The U.S. Small Business Administration administrator has been granted special authority and has declared all 50 U.S. states, as well as U.S. territories, as impacted by the coronavirus, thus making EIDL loans available to them. The U.S. Small Business Administration has been provided with up to $7 billion in capital to loan to small businesses in order to keep the economy moving. These U.S. Small Business Administration loans provide up to $2 million in working capital for small businesses, and are also available to self-employed individuals and independent contractors, as well as non-profits.

The U.S. Small Business Administration EIDL loans offer very favorable terms. The duration of EIDL loans is up to a 30-year term. Small businesses receive an interest rate of 3.75%, while non-profits receive 2.75%. There is no cost for a small business or non-profit to apply for an EIDL loan, and if a business is approved for a smaller dollar amount EIDL loan, it can later apply to increase the loan amount. If the loan amount is less than $10,000.00, the U.S. Small Business Administration must approve it within three (3) business days.

For EIDL loans, the U.S. Small Business Administration will provide a cash advance of $10,000.00 whether or not the loan is approved, and this would be similar to a bridge loan while small businesses wait for the EIDL or Paycheck Protection Program loan funds to be disbursed. The EIDL is available for both existing and new U.S. Small Business Administration loans.

Paycheck Protection Program

The CARE Act also establishes a Paycheck Protection Program, which is administered through the U.S. Small Business Administration’s largest loan program to utilize more than 2000 lenders across the United States to deploy up to $10 million in capital to businesses and non-profits that need it up. These funds are meant to be used for salaries, wages, commissions, parental and family sick leave, paid time off, vacation pay, as well as mortgage and lease payments for up to 8 weeks, and are to be disbursed broadly for the period of February 15, 2020 through June 30, 2020. Payment on these loans is deferred for no less than six (6) months and up to one (1) year. Even though this is a loan, the intent behind the Paycheck Protection Program is to be a grant to small businesses, and if the loan proceeds are used to maintain employees and their salaries, at least a portion of the loan will be forgiven. Any amounts not forgiven will be rolled in 10-year loan with maximum 4% interest rate and will continue to be deferred until the end of 6 months to 1 year. These loans have waived both personal guarantees and credit requirements.

Debt Relief Program

The Debt Relief Program is available for existing and new borrowers of the U.S. Small Business Administration’s 7A, 504, micro and disaster loans. Under this program, the U.S. Small Business Administration will cover the entire payment and the borrower will not have to pay it back, and up to 6 months of debt relief is available.

Small Business Non-Financial Assistance

The SBA also offers non-financial assistance such as no-cost business counseling through its 68 district offices across the United States. In Baltimore, the SBA has a district office located at 100 South Charles St., Suite 1201, Baltimore, MD 21201 as well

Following SBA Updates

As there is a high risk of misinformation, the SBA recommended only relying on SBA.gov, Treasury.gov and Whitehouse.gov as a source for information concerning EIDL loans.

The U.S. Small Business Administration, along with Congress and the President, have acted quickly to provide easy access to capital for small businesses, non-profits, independent contracts and self-employed businesses. If you need help with navigating the various options that are available for your business, please contact Steiner Law Group at (410) 670-7060.