State by state financial assistance seems to be the only hope in this moment of COVID-19 crisis. The SBA loans harsh requirements are selective of which businesses are going to survive and which are going to close their doors forever. The real answer seems to be coming from state legislations and how each state government evaluates the needs of its constituents.
The NJ EDA is asking all small businesses to urgently participate in a survey to help make quick decisions on how to allocate funding. Fill out the survey at the end of the article if your business is in New Jersey.
The Economic Injury Disaster Loans are no different from any other SBA response: good credit, collateral and ability to repay, in addition to a max 3.75% interest rate, are required in a moment in which uncertainty of the COVID-19 pandemic’s economic impact is the number one concern small businesses face.
This economic impact is not measurable in the way a natural disaster would be. There is not end in sight, and when it ends, there is no certainty of how long it would take for businesses to recover.
Other state bills are asking for more comprehensive financial assistance
In contrast, House Small Business Committee Chairwoman Nydia M. Velázquez (D-NY) introduced the COVID–19 Relief for Small Businesses Act of 2020, comprehensive legislation that would provide relief to small businesses facing consequences from the ongoing COVID-19 outbreak.
“After speaking with my Committee colleagues and hearing firsthand of the struggles facing countless small businesses due to the coronavirus pandemic, I am introducing sweeping legislation to tackle the economic hardship and fallout facing our nation’s employers and workers,” said Chairwoman Velázquez. “This bill offers across the board solutions from channeling capital to small businesses in need by providing zero-interest direct loans, grants, and loan debt relief, to increasing access to federal contracts, and equipping entrepreneurial development centers with the technology they need to serve entrepreneurs remotely.”
Key components of the bill include:
- The creation of an SBA Business Stabilization Direct Loan Program that authorizes $100 billion to offer interest-free loans with up to 50% loan forgiveness to qualified employers.
- The authorization of $100 billion to provide up to $100,000 in direct grants for small businesses impacted by COVID-19. These grants would be targeted to businesses that have had to close their doors temporarily due to the outbreak.
- Immediate loan debt relief to current and new SBA borrowers.
- Expediting and streamlining the SBA’s economic injury disaster loan program to ensure small businesses can access cash easier and faster.
- The authorization of additional grant funding to allow SBA resource partners to ensure they can provide education and marketing materials to educate small business customers on the public health emergency and steps to protect the business and maintain operations.
- Amending several contracting provisions to provide more opportunities for small businesses affected by the outbreak to quickly and efficiently be awarded government contracts.
Now compare these options with the actual SBA Economic Injury Loans:
To be eligible for EIDL assistance, New Jersey-based small businesses or private non-profit organizations must have sustained economic injury, as well as being located in a disaster-declared county or contiguous county, which all New Jersey counties currently are.
- Credit History – Applicants must have a credit history acceptable to SBA.
- Repayment – Applicants must show the ability to repay the loan.
- Collateral – Collateral is required for all EIDL loans over $25,000. SBA takes real estate as collateral when it is available.
- SBA will not decline a loan for lack of collateral, but SBA will require the borrower to pledge collateral that is available
- The interest rate is determined by formulas set by law and is fixed for the life of the loan. The maximum interest rate for this program is 3.750 percent.
- The law authorizes loan terms up to a maximum of 30 years. SBA will determine an appropriate installment payment based on the financial condition of each borrower, which in turn will determine the loan term.
In any case, we will have to wait and see how the response is state by state.
The problem is, families depending on their employers and small business owners themselves don’t have much time to wait. Thousands of small business have been force to close due to the quarantine.
The NJ Economic Development Authority in partnership with the Office of the Governor of New Jersey, is working to develop programs and resources to support New Jersey’s business community during the COVID-19 outbreak.
SMALL-TO-MEDIUM ENTERPRISE (SME) FINANCIAL ASSISTANCE SURVEY
They’re seeking information from small-to-medium enterprise owners and leaders to inform the development of new programs and initiatives to support organizations during the COVID-19 outbreak.
The survey can be accessed at this link: https://www.surveymonkey.com/r/CVSupport.
They are trying to generate responses quickly as they will use this information to guide the development of short-term support that will be launched imminently.
You might be interested: Beyond COVID-19: Be proactive about your business cash flow
SBA Loan applications
If you want to take the plunge, here are the different ways the SBA is accepting applications. And good luck trying to enter the website!
Applicants may apply online, receive additional disaster assistance information and download applications at disasterloan.sba.gov/ela.
Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email firstname.lastname@example.org for more information on SBA disaster assistance. Individuals who are deaf or hard-of-hearing may call (800) 877-8339.
Completed financial assistance applications should be mailed to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155
Technical Assistance for Applying for SBA EIDL Loans
The State of New Jersey is currently developing plans to offer technical assistance to businesses that wish to apply for SBA disaster loans. As new information about these resources become available, it will be posted here.
Updated: March 20, 2020
Source: SBA Disaster Assistance in Response to the Coronavirus