As part of the federal government’s efforts to combat the coronavirus (COVID-19) outbreak, and to minimize economic disruption to the nation’s 30 million small businesses, the U.S. Small Business Administration has issued revised criteria for states or territories seeking an economic injury declaration related to COVID-19.
According to SBA Administrator Jovita Carranza, the relaxed criteria will have two immediate impacts:
- A faster, easier qualification process for states seeking SBA disaster assistance. Historically, the SBA has required that any state or territory impacted by disaster provide documentation certifying that at least five small businesses have suffered substantial economic injury as a result of a disaster, with at least one business located in each declared county/parish. Under the just-released, revised criteria, states or territories are only required to certify that at least five small businesses within the state/territory have suffered substantial economic injury, regardless of where those businesses are located.
- Expanded statewide access to SBA disaster assistance loans for small businesses. SBA disaster assistance loans are typically only available to small businesses within counties identified as disaster areas by a governor. Under the revised criteria, disaster assistance loans will be available statewide following an economic injury declaration. This will apply to current and future disaster assistance declarations related to coronavirus.
Carranza says the administration is very encouraged that banks and financial institutions are responding to efforts to mobilize a public-private response to the COVID-19 outbreak. As a result, most small businesses that need credit during these uncertain times will be able to obtain it. However, the goal is to ensure that credit is available to any and all small businesses that need credit but are unable to access it on reasonable terms through traditional lending channels, Carranza adds.
“To that end, the SBA is relaxing the criteria through which states or territories may formally request an economic injury declaration, effective immediately,” she states. “Furthermore, once an economic injury declaration has been made in a state or territory, the new rules allow the affected small businesses within the state or territory to apply for a disaster assistance loan.”
SBA’s economic injury disaster loans offer up to $2 million in assistance for each affected small business. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
The process for accessing SBA’s COVID-19 disaster relief lending is as follows:
- The SBA offers designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of COVID-19. Upon a request received from a state’s or territory’s governor, SBA will issue under its own authority an economic injury disaster loan declaration. This authority is provided under the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently passed by Congress and signed by President Trump.
- Any such economic injury disaster loan assistance declaration issued by the SBA makes loans available statewide to small businesses and private, nonprofit organizations to help alleviate economic injury caused by 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, the information on the application process for economic injury disaster loan assistance will be made available to affected small businesses within the state.
- 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 percent for small businesses. The interest rate for nonprofits is 2.75 percent.
- 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.
For more information, visit the SBA disaster assistance website at SBA.gov/Disaster.
For detailed information on SBA programs for the coronavirus, visit www.sba.gov/coronavirus, and for information on all federal programs, visit www.usa.gov/coronavirus or www.gobierno.usa.gov/coronavirus.
