Small Business Disaster Loans

March 24, 2020

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The State of Missouri was declared economically impacted by the Covid-19 virus and is eligible for SBA disaster loans. This declaration happened over the weekend, it covers small businesses, private non-profits, small agriculture cooperatives and small aquaculture enterprises. The loans are for those organizations financially impacted because of the Covis-19 virus. The disaster loan is for up to $2 million, at an interest rate of 3.75 percent for small business and 2.75 percent for private non-profits.

The loans are to meet financial obligations and operating expenses if not for the outbreak organizations would struggle. The definition of operating expense are expenditures that a business incurs to keep itself running but do not include anything related to production, such as material, direct labor and large expenses like machines and buildings. Now this is where it get tricky. The SBA Disaster Loan does not cover fixed debts; payroll, accounts payable and other bills that cannot be paid do to the Covid-19 virus impact. The loan is not for refinancing long-term debts.

Anyone pursuing a disaster loan will need to have a credit history acceptable to the SBA, show the ability to repay the loan and have collateral for all economic injury disaster loans over $25,000. The term is up to 30 years, but the SBA, based on financial condition of the borrower, determines length.

Applicants may apply online at https://disasterloan.sba.gov/ela or by contacting the SBA Customer Service Center at (800)659-2955 or disastercustomerservice@sba.gov. The deadline is December 21, 2020.

There is a lot of gray area in the announcement. Please take the time to read and write down your questions. Look at the organizations needs to ensure this economic injury disaster loan would help. Feel free to reach out for help. The University of Missouri hosts the Small Business Development Centers. In Northeast Missouri, there are partner locations in Hannibal, Kirksville and Columbia. Contact your local University of Missouri Extension office for the SBDC office near you.

Charles Holland, Community Economic Development Specialist with the University of Missouri Extension, wrote this article. Please feel free to contact Charles with any business related questions. Contact Charles at hollandca@missouri.edu or the University of Missouri Extension-Monroe County office at 660-327-4158.

Disaster Loan Assistance Available:

Economic Injury Disaster Loans (EIDLs) – 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.

Credit Requirements:

• Credit History – Applicants must have a credit history acceptable to SBA.

• Repayment – Applicants must show the ability to repay the loan.

• Collateral – Collateral is required for all EIDL loans over $25,000. SBA takes real estate as collateral when it is available. SBA will not decline a loan for lack of collateral, but SBA will require the borrower to pledge collateral that is available.

Interest Rates:

The interest rate is determined by formulas set by law and is fixed for the life of the loan. The maximum interest rate for this disaster is 3.75 percent.

Loan Terms:

The law authorizes loan terms up to a maximum of 30 years. SBA will determine an appropriate installment payment based on the financial condition of each borrower, which in turn will determine the loan term.

Loan Amount Limit:

The law limits EIDLs to $2,000,000 for alleviating economic injury caused by the disaster. The actual amount of each loan is limited to the economic injury determined by SBA, less business interruption insurance and other recoveries up to the administrative lending limit.

SBA also considers potential contributions that are available from the business and/or its owner(s) or affiliates. If a business is a major source of employment, SBA has the authority to waive the $2,000,000 statutory limit.

Loan Eligibility Restrictions:

Noncompliance – Applicants who have not complied with the terms of previous SBA loans may not be eligible. This includes borrowers who did not maintain required flood insurance and/or hazard insurance on previous SBA loans.

Note: Loan applicants should check with agencies / organizations administering any grant or other assistance program under this declaration to determine how an approval of SBA disaster loan might affect their eligibility.

Refinancing:

Economic injury disaster loans cannot be used to refinance long term debts.

Date: 03/21/2020

Insurance Requirements:

To protect each borrower and the Agency, SBA may require you to obtain and maintain appropriate insurance. By law, borrowers whose damaged or collateral property is located in a special flood hazard area must purchase and maintain flood insurance. SBA requires that flood insurance coverage be the lesser of 1) the total of the disaster loan, 2) the insurable value of the property, or 3) the maximum insurance available.

Applicants may apply online, receive additional disaster assistance information and download applications at https://disasterloan.sba.gov/ela. Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov for more information on SBA disaster assistance. Individuals who are deaf or hard-of-hearing may call (800) 877-8339. Completed applications should be mailed to U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.