UPDATE: SBA Economic Injury Disaster Loans (EIDL)

Lyons Gaddis COVID-19 Alert

This Alert is one in a collection of articles created by Lyons Gaddis in our effort to get important information to our clients regarding the effect of the novel coronavirus (COVID-19) outbreak in the United States.  This Alert focuses on small business owners who are dealing with closures and other challenges in response to recommended or mandated social distancing measures in the wake of the spreading coronavirus 

March 27, 2020
UPDATE: SBA Economic Injury Disaster Loans (EIDL)
By Cameron A. Grant, Shareholder

Several new programs have been released to assist small businesses. Read below for details on significant financial assistance options to consider for your business.

Small Business Administration (SBA)

Financial Options

The Economic Injury Disaster Loan (EIDL) establishes an emergency grant to allow an applicant to receive an advance on that loan of no more than $10,000, which the SBA must distribute within three days. The money may be used to pay for employee sick leave (COVID-19-related), mortgage or rent and other overhead expenses. The grants would be awarded on a first-come, first-served basis until the $10 billion fund is exhausted, and applicants would not have to repay the $10,000 grant even if they are denied the loan. Visit the SBA website to learn more about the EIDL loan and other SBA loans.

Employers may be eligible for loan forgiveness on a portion of their federal small business loans (tax-free) for amounts spent for certain payroll, sick leave, family leave and other overhead expenses between Feb. 15 and June 6, 2020, as well as certain other debt obligations incurred prior to Feb. 15, 2020.

The SBA will pay the principal, interest and any associated fees that are currently owed on certain SBA loans for a six-month period starting on the next payment due date. Loans that are already on deferment would include an additional six months of payment by the SBA beginning with the next payment.

Start the Application Online

The interest rate will not exceed 4% with repayment terms up to 30 years and loan amounts up to $2M.

The EIDL is intended to be used for “ordinary and necessary operating expenses.”

Borrowers are strongly encouraged to apply for the EIDL online – you will be able to track the progress of your loan in real-time and upload documentation directly to the portal.

The process is estimated to take three weeks for application and underwriting (from the time all documents are submitted), with an additional week to fund the loan.

You may assign an agent to assist with the application process, (their fee cannot exceed $500).

Other Financial Options:

New directives allow for a withdrawal from retirement funds (i.e. 401(k), etc.) of up to $100,000 in 2020 without paying a penalty if the employee, their spouse or dependent(s) are diagnosed with COVID-19, or experience adverse financial consequences as a result of being quarantined, furloughed, laid off or having work hours reduced due to the coronavirus pandemic.

Federal student loan borrowers are not required to make a payment through Sept. 30, 2020. During this time, no interest will accumulate on those federal loans (payment suspension applies only to loans held by the Department of Education, not private loans). Regardless, loan borrowers should call their lender to verify eligibility.

Attorneys in the Business and Transaction Group at Lyons Gaddis are available to advise you in relation to these loan programs and other COVID-19 related matters impacting your current and future business operations.