U.S. Small Business Administration Economic Injury Disaster Loans for Small Businesses Impacted by the Coronavirus COVID-19

By Kayla M. Fajota

On March 19, 2020, the U.S. Small Business Administration (SBA) approved and issued, under the Coronavirus Preparedness and Response Supplemental Appropriations Act, an Economic Injury Disaster Loan (EIDL) declaration for Hawaii (Hawaii Declaration #16369). The EIDL assistance program was designed to keep Hawaii’s small businesses afloat during these economically trying times due to the coronavirus.

Under the Hawaii Declaration #16369, the SBA is providing fixed low-interest (3.75% for small businesses and 2.75% for non-profits) working capital loans to Hawaii’s small businesses and most private, non-profit organizations in order for these entities to meet their ordinary and necessary financial obligations that cannot be met as a direct result of the coronavirus. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid.

The SBA has the discretion to determine the amount of the EIDL loans and EIDL loan terms on a case-by-case basis. EIDL loans are calculated based on the actual economic injury to the small business and capped at $2 million unless certain exceptions apply. The term of the EIDL loans are based on the financial condition of each borrower and also capped at a maximum of 30 years.

Who can apply for EIDL loans?
“Small businesses” as defined by the small business size regulations in Title 13 Part 121 of Code of Federal Regulations (CFR), small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes. See the SBA’s table of small business size standards if you are unsure whether you qualify as a small business: https://ecfr.io/Title-13/se13.1.121_1201.

Are there requirements and/or restrictions when applying for EIDL loans?
Yes. Small business applicants must: 1) have a credit history acceptable to the SBA; 2) be able to show their ability to repay the loan; and, 3) pledge collateral for all EDIL loans over $25,000.  In addition, SBA may require some applicants to obtain and maintain certain insurance, like flood insurance if the collateral property is located in a special flood hazard area. Further, eligibility may be affected if small businesses are compensated from other sources (e.g., grants or other loans from government agencies or private organizations, or claims for civil liability) to offset economic injury. If an applicant has not complied with the terms of previous SBA loans, that small business may not be eligible for this EIDL loan as well. Small businesses are also restricted from using EIDL loans to refinance long-term debt.

How can small businesses apply for EIDL loans?
Eligible small businesses can apply by mailing in copies of required forms or online through the SBA’s website: https://disasterloan.sba.gov/ela. Applicants should complete the following forms and provide the following information:

  • Business Loan Application (SBA Form 5)
  • Economic Injury Disaster Loan Supporting Information (SBA Form P-019)
  • IRS Form 4506-T
  • Complete copies, including all schedules, of the most recent Federal income tax returns for the applicant business; if not yet filed, a year-end profit and loss statement and balance sheet for that tax year is acceptable, or an explanation as to why it is not available.
  • Personal Financial Statement (SBA Form 413D)
  • Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used)
    (*Loan Officer and Case Manager may require additional information)

For more information, contact Kayla at kmf@hawaiilawyer.com.

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