On March 21, the U.S. Small Business Administration announced that small businesses adversely impacted by the coronavirus in Minnesota and Wisconsin could immediately apply for low-interest Economic Injury Disaster Loans (EIDL).
Under the EIDL program, direct loans of up to $2 million per business are immediately available, and no national or state caps on the amount of money the federal government is prepared to lend to support small business have been put in place, said SBA officials during a media briefing. “If you are eligible, you will get it, “ said Brian McDonald, SBA District Director for Minnesota.
SBA officials are encouraging business owners to begin immediately applying for these loans, which will carry a 3.75 percent interest rate and offer terms that vary but could extend up to 30 years.
Officials said the approval process is expected to take between 18 and 21 days, with an additional two to five days needed to fund the loan. Officials said they were working to shorten these timeframes.
The EIDL program operates outside of the banking system, but SBA officials said they expected businesses to utilize their financial institutions to manage the flow of funds, meaning banks could anticipate an influx of deposits as these loans are funded.
Eligibility requires business to have a credit history consistent with SBA guidelines, have demonstrated an ability to repay, and collateral (which may include the business owner’s personal pledge to repay). Forms required include a 2019 tax return, a 2019 P&L, a 2020 year-to-date P&L, and 2020 year-to-date sales figures.
There are an estimated 450,000 small businesses in Wisconsin and 530,000 small businesses in Minnesota that are eligible. Some businesses in Iowa and South Dakota, which operate in counties that border Minnesota, are also eligible for these disaster loans. Other states that had previously come online with EIDL include: Arkansas, Arizona, Colorado, Kentucky, Louisiana, Michigan, Mississippi, Nebraska, North Dakota, Oklahoma, Oregon, Tennessee, Texas, Vermont and Wyoming.
Should a business be denied a disaster loan, SBA officials are required to reach out to these entities within 48 hours to either direct people to resource partners to find other assistance, or help business owners improve their applications so they may reapply.
The EIDL program is being deployed independently of a plan put forth by Sen. Marco Rubio (R-FL) that would utilize the SBA’s 7(a) loan program to provide help to small businesses.
Loan applications will be accepted through the end of 2020.
“We are going all hands on deck at SBA,” said Robb Scott, Great Lakes regional administrator. The SBA has increased its staffing hours to seven days a week and is offering informational webinars daily to help business owners and their resource partners understand how to apply.
The EIDL funds are earmarked for working capital.
“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. Disaster loans can provide vital economic assistance to small businesses to help overcome the temporary loss of revenue they are experiencing,” said Jovita Carranza, SBA Administrator.
Economic injury disaster loans cannot be used to refinance long term debts.
There are also SBA disaster loans available for private non-profit organizations, offered at a rate of 2.75 percent.
Business owners apply online.
“It’s not extremely complicated, but it’s not easy either,” Scott said. “This is a loan, and this is taxpayer money we are lending.”