March 23, 2020

UPDATE:  A federal disaster declaration has been made for the entire State of Alabama meaning businesses located in every county in the State are eligible to apply for financing under the SBA's Federal Disaster Loan Program.

The U.S. Small Business Association (SBA) is offering low interest federal disaster loans for working capital needs to small businesses suffering substantial economic injury as a result of COVID-19.  These loans are provided as part of the SBA's Federal Disaster Loan Program.  As of now, businesses in those counties in Alabama contiguous with the States of Georgia or Florida may apply for such loans due to federal disaster declarations in those States.  The U.S. Department of Commerce has formally requested a disaster declaration for the State of Alabama, which once approved, will allow for all qualifying businesses within Alabama to apply for working capital loans through the Federal Disaster Loan Program.  Such declaration for Alabama is expected to be made within the next 48 hours. 

The SBA's Federal Disaster Loan Program provides financing to qualifying small business in the form of working capital loans with the following terms:

• Up to $2,000,000 per applicant;

• 3.75% fixed interest rate on loans to for-profit companies;

• 2.75% fixed interest rate on loans to non-profit companies;

• Up to 30 year term and amortization (determined on a case-by-case basis);

• Funds may be used for fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.

Loans up to $25,000 do not require collateral.  Those loans in excess of $25,000 and up to $2,000,000 will require collateral such as liens on real estate or other available property.  The SBA will not decline a loan for lack of collateral, but will require borrowers to pledge any property available. 

The timeframe for approval of an application once it is filed with the SBA is projected to be between 30 and 45 days.  Applicants are encouraged by the SBA to get their applications filed as soon as possible. 

An applicant must qualify as a small business under the SBA's guidelines which are located at https://www.sba.gov/document/support--table-size-standards.  If an applicant has multiple businesses owned by separate entities, then multiple applications for loans may be filed for each individual entity, provided each entity has its own individual EIN.  The SBA loan cap does not apply to this program, meaning those businesses with existing SBA loans are not precluded from applying for additional loans under the Federal Disaster Loan Program.  Furthermore, this program is not intended as a lender of last resort meaning applicants are not required to seek credit elsewhere before applying. 

Eligible industries include, but are not limited to, hotels, retailers, restaurants, recreational facilities, manufacturers, owners of rental property, wholesalers and many others.  Applicants must have established their business prior to the COVID-19 outbreak, or otherwise be under construction or delayed in opening due to the impact of the virus. 

Funds provided under this program will come directly from the U.S. Treasury.  Applicants do not apply with a bank, there is no application fee, and an applicant is not required to take the funds if their application is approved. 

Applications for the loans can be made through the SBA's website at http://asbdc.org/eidl.  The SBA encourages online registration, however, paper registration is available as needed. 

While your business may not be located within one of the 16 counties currently eligible under the program, businesses may still begin the registration process currently in anticipation that the entire State will be eligible within the next couple of days. 

If you are a qualifying small business or believe you are so, and have been affected financially by COVID-19, the SBA's Federal Disaster Loan Program may provide working capital needs during this difficult time.  Should you need assistance or have questions with respect to this loan program, please feel free to give any of our attorneys a call.