March 24, 2020
The swift actions of the federal and state government to prevent the transmission of the Coronavirus (COVID-19) has severely impacted businesses. In Georgia, bars and nightclubs have been ordered closed, restaurant dining rooms down and a ban on gatherings of 10 people or more. Although necessary for public health, these changes have dealt a powerful blow to the vitality of many. It’s obvious there are many businesses which currently, or soon will need help with payroll, leases and employee expenses. Matters have been made worse because many don’t know where to turn for help. The good news is companies absorbing COVID-19 losses can now apply for an SBA Economic Injury Disaster Loan (EIDL) to help. To help clients and prospects learn about the program and how to apply, Wilson Lewis has provided a summary of the key details below.
What is an Economic Injury Disaster Loan?
This is a working capital loan for small businesses, small agricultural cooperatives, and nonprofit organizations to help them through disaster recovery. These loans are limited to applicants with no other credit options available from banks or other financial institutions. The SBA identifies a small business based on average annual receipts or the average number of employees for a given year.
How can Loan Funds be Used?
Funds can be used to pay fixed debts, payroll liabilities, accounts payable, employee sick leave compensation and other liabilities that could not be paid due to the disaster’s impact. It’s important to note, funds can not be used to refinance debts incurred from prior disaster events, make payments on other federal government or SBA loans, pay tax or civil penalties, or to pay dividends to owners or partners unless it relates to services performed for the business.
What are the Credit Requirements?
There are two primary credit requirements, including:
What are the Loan Rates & Terms?
The interest rate for small business loans is 3.75% and nonprofits 2.75%. The loans are long term to reduce the payment amounts to allow for maximum flexibility with a ceiling of 30 years. The maximum amount a business may receive is $2M, but the SBA determines the actual loan amount. Eligibility is based on a company’s total debt obligations, operating expenses due during the disaster period plus amounts needed to maintain adequate working capital, and the expenses and working capital amounts that could have been met.
What is the Loan Approval Process?
The loan approval process is typically 2-3 weeks from the date an application is submitted. Once approved, it can take up to five additional days for fund disbursement. Once disbursed, a loan officer will be assigned to facilitate loan servicing.
Contact Us
At a time when many businesses are challenged by the Coronavirus response, it’s important to have access to working capital to fund operations. The Economic Injury Disaster Loan is one option offered to meet financial needs. If you have a question about the information outlined above or need assistance with another COVID-19 issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us.