COVID-19: SBA Reopens Applications for Disaster Loans

Previously, we posted an article describing the various stimulus options for healthcare providers and small businesses experiencing financial hardship as the result of COVID-19. In particular, the article articulated how the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) recognized the COVID-19 crisis as an “economic injury” for purposes of applying for and obtaining an Economic Injury Disaster Loan (“EIDL”) administered by the U.S. Small Business Administration (“SBA”). 

On April 15, 2020, the SBA portal shut down and stopped accepting new EIDL applications due to the volume of applications and lack of funding.

However, on June 15, 2020, the SBA portal reopened, whereby the SBA is now accepting new EIDL and EIDL Advance applications from eligible U.S. small businesses.

Small businesses with less than 500 employees may qualify for an EIDL up to $2 million dollars—with an interest rate of 3.75%—for bills and expenses the business is unable to pay as a result of COVID-19’s impact on business operations. An EIDL may be used to pay fixed debts, payroll, accounts payable, and bills not covered by a Paycheck Protection Program (“PPP”) loan.

To qualify for an EIDL, the SBA requires that an applicant submit information and verify the structure of the business. Specifically, among other specifications, the SBA applicant must self-certify whether the business is (a) a business with not more than 500 employees; (b) an individual who operates under a sole proprietorship, with, or without employees, or as an independent contractor; or (c) a business with more than 500 employees that is small under SBA Size Standards.

The SBA applicant must then review and certify (1) the applicant is not engaged in any illegal activity as defined by Federal guidelines; (2) no principal of the applicant with a 50% or greater ownership interest is more than 60 days delinquent on child support obligations; (3) the applicant does not directly or indirectly generate revenue, present live performances, or display depictions involving prurient sexual nature; (4) the applicant does not derive more than one-third of gross annual revenue from legal gambling activities; (5) the applicant is not in the business of lobbying; and (6) the applicant cannot be a state, local, or municipal government entity and cannot be a member of Congress

The SBA applicant must disclose general business information (business name, address, type, number of employees, business activity, etc.), financial information (gross revenue and/or cost of goods sold in the past twelve months), and other information for purposes of determining applicant eligibility. The SBA estimates the total time for the completion of an EIDL application is approximately two hours, although it may take an applicant less time. 

The SBA creates flexibility with regard to repayment of an EIDL and offers long-term repayment plans up to a maximum of 30 years. However, the terms of repayment are typically calculated on a case-by-case basis.

An EIDL also includes an EIDL Advance, which provides up to $10,000 ($1,000 per employee). The EIDL Advance is designed to provide economic relief to businesses that are currently experiencing a temporary loss of revenue. The EIDL Advance is typically paid within 3 days of submitting an EIDL application.  

However, while the EIDL Advance will not have to be repaid, the amount of the EIDL Advance received by a qualified applicant will be deducted from total loan eligibility. It is worth noting that approval for an EIDL is not required in order for a small business to receive an EIDL Advance. 

Because an applicant is submitting self-certifications to the government to verify that the applicant’s eligibility for an EIDL and EIDL Advance, the applicant is subject to the penalty of perjury pursuant to 28 USC 1746.

As always, our attorneys are here to answer any questions you may have about how to keep your head above water during these trying times. Please feel free to call us at 609-799-5150 or mail us at info@buttacilaw.com any time with your questions or concerns.

Stay safe, stay healthy, and we will get through this together.

Posted in: Human Resources, Regulation, Reimbursement, Risk Management