By Our Firm's Corporate and Business Transactions Practice Professionals
In the wake of a nationwide crisis, the U.S. Small Business Administration (SBA) is offering low-interest small business loans for working capital through its Disaster Loan Assistance program to small businesses impacted by COVID-19. In an effort to mitigate the negative impact of COVID-19, the SBA has been given authority and funding to make over $7 billion in loans (specifically, Economic Injury Disaster Loans) to qualifying small businesses to help them weather these trying times and to bolster an economic recovery. Not only will such Economic Injury Disaster Loans allow up to $2 million in assistance for the payment of fixed debts, payroll and accounts receivable at a reasonable rate, but repayment, determined by individual loan, may be amortized over a longer term, not to exceed 30 years.
In order to act quickly, the SBA is loosening its requirements for states requesting disaster assistance loans. Under normal circumstances, the SBA requires that states provide documentation certifying that at least five small businesses have suffered substantial economic injury, with at least one business being located in each county/parish declared eligible. Under the new requirements, states need only certify that at least five small businesses within the entire state have suffered substantial economic injury. Furthermore, once the Governor of a state has acquired a disaster declaration, Economic Injury Disaster Loans become available statewide.
To qualify, small businesses must demonstrate a loss in working capital due to COVID-19. Businesses should be prepared to provide a copy of its most recent tax returns, schedule of liabilities and current year to date profit and loss statement.
As of March 20, 2020, Ohio is declared a disaster area under SBA criteria retroactive to January 31, 2020. For additional information, visit https://disasterloan.sba.gov/ela/ or contact a WHP attorney.
This article provides an overview and summary of the matters described therein. It is not intended to be and should not be construed as legal advice on the particular subject.