COVID-19 and Loan Assistance for Small Businesses

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Small businesses in designated U.S. states and territories are now eligible to apply for an economic injury disaster loan (EIDL) due to the 2019 novel coronavirus (COVID-19) through the U.S. Small Business Administration (SBA).

These loans provide working capital to small businesses suffering substantial economic injury as a result of COVID-19. The loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid as a result of the effects of the COVID-19 pandemic. The loans may not be used for expansion or to replace lost sales or profits.

EIDL basics

Eligible businesses may apply for loans for up to $2 million. Eligibility is based on size, type of business and financial resources. The loan term may be up to 30 years, determined on a case-by-case basis. The interest rate is 3.75 percent for small businesses and 2.75 percent for non-profits. The loans may be prepaid at any time without penalty. Loans more than $25,000 require collateral and SBA may agree to a subordinate lien position. It will be important for businesses to review their existing loan documents regarding any restrictions on additional debt or liens, and determine if consent of their current lender is required before they start the application process.

Wisconsin was approved as a designated state by SBA on March 20, 2020. Businesses can apply online through SBA’s secure website. Paper applications can also be downloaded and mailed to SBA, although filing electronically is easier, faster and more accurate.

SBA EIDL filing requirements

The following required forms are included in the SBA’s online application:

The SBA may request additional information, including a current year-to-date profit and loss statement and monthly sales figures (SBA form 1368)

Other information you should know

Beyond the aforementioned forms, be aware of the following: 

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National Law Review, Volumess X, Number 86