The Small Business Administration has been working to implement Economic Injury Disaster Loans and the Paycheck Protection Program to assist small businesses impacted by COVID-19.
How the SBA Is Handling Coronavirus-Related Issues
Image via SBA.gov
As soon as America’s businesses began to shutter as a result of COVID-19, the United States Small Business Administration (SBA) began reacting to the situation and announcing its assistance efforts. Let’s take a look at how the Administration has been handling coronavirus-related issues since this began directly impacting small businesses throughout the country.
On March 12, the SBA announced it would provide disaster assistance loans to small businesses impacted by COVID-19 via its Economic Injury Disaster Loans of up to $2 million. (1) The following day, the Administration released a statement applauding the President’s declaration of a national emergency, with recently appointed Administrator Jovita Carranza calling it a "significant and very important step in reducing barriers to public health and protecting America’s 30 million small businesses." (2)
SBA Administrator Jovita Carranza Image via SBA.gov
On March 17, the SBA issued revised criteria for states or territories seeking an economic injury declaration related to COVID-19. (3) At that time, the Administration said the "relaxed" criteria would make for a "faster, easier" qualification process for states seeking disaster assistance, and would include expanded, statewide access. Typically, the loans are only available to small businesses within counties identified as disaster areas by a Governor.
On March 23, Carranza announced automatic deferment on existing SBA disaster loans through the end of the year. (4) Borrowers of both home and business disaster loans do not have to contact the Administration to request deferment.
On March 27, the CARES Act was signed into law, and with it came the now famous Paycheck Protection Plan (PPP). Carranza praised the President for acting "swiftly and in a bipartisan manner" to support small businesses. (5) She also noted that the SBA was "ready to provide them with the support they need to remain open and keep their workers employed."
On March 31, the SBA issued a press release discussing the details of the $349 billion PPP. (6) It said the program would be available retroactively from Feb. 15, 2020, so employers could rehire their recently laid-off employees, and would continue through June 30, 2020. Maximum loan amounts are up to $10 million. According to the release, loans would be available to "all small businesses, including non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees, or no greater than the number of employees set by the SBA as the size standard for certain industries."
Loans are to be forgiven if used for payroll costs and other designated operating expenses, such as mortgage, interest, or utilities in the eight weeks following the date of loan origination. All loans have an interest rate of 1%, a maturity of two years, the first payment deferred for six months, a100% guarantee by the SBA, no collateral, no personal guarantees, and no borrower or lender fees payable to the SBA.
The PPP launched on April 3, with loans being administered at the local level by banks and credit unions. On that day, Administrator Carranza said, "“These loans will bring immediate economic relief and eight weeks of financial certainty to millions of small businesses and their employees. We urge every struggling small business to take advantage of this unprecedented federal resource their viability is critically important to their employees, their community, and the country.” (7)
The following day, the SBA clarified eligibility for faith-based organizations to participate in the PPP and Economic Injury Disaster Loan Program.
By April 12, the American Bankers Association reported that 820,000 loans totaling roughly $205 billion had been processed, with over 4,400 lenders participating in the program, up from 1,700 a week earlier. (8)
On April 16, the SBA posted the following notice, announcing that they had already reached the maximum funds available for the COVID-19 programs:
Lapse in Appropriations Notice: SBA is unable to accept new applications at this time for the Paycheck Protection Program or the Economic Injury Disaster Loan (EIDL)-COVID-19 related assistance program (including EIDL Advances) based on available appropriations funding.
At press time for this article, Congress was in heated debate about authorizing an additional $250 billion, as requested by the President, to supplement the original $349 billion already spoken for with 1.7 million loans.
The SBA has a dedicated COVID-19 "Small Business Guidance & Loan Resources" page which businesses are encouraged to check out. (9)
This is far from over, and it’s wise for small businesses to stay as informed as possible on a day-to-day basis.