Phase I of the Federal Relief Bills: SBA and Economic Injury Disaster Loans

There has been so much information circulating in the past three weeks in response to the novel coronavirus pandemic, many citizens are likely finding it hard to keep track of what is included in the various United States federal relief bills. Yes, this is plural. There are officially three (3) phases to the relief package.

Coronavirus Preparedness and Response Supplemental Appropriations Act (Phase I) was enacted into law March 6, 2020 and provides $8.3 billion in emergency funding for federal agencies to ensure vaccines developed to fight the coronavirus are affordable, and that impacted small businesses can qualify for Small Business Administration (SBA) Economic Injury Disaster Loans (EIDLs). This is the part of the legislation we are discussing in this article.

Families First Coronavirus Response Act (Phase II) Phase II, H.R. 6201, became law March 18, 2020. This $100 billion package includes provisions for paid sick leave, free coronavirus testing, expanded food assistance, additional unemployment benefits, and requirements that employers provide additional protection for healthcare workers

The CARES (Coronavirus Aid, Relief, and Economic Security) ACT (Phase III), H.R. 758 (116), signed into law March 27, 2020, provides direct payments to individual taxpayers and their dependents, a huge expansion to unemployment benefits, including the self-employed, student loan forbearance, and much more. You can find more details on how this affects you and your business through this recent Extension article.

The Economic Injury Disaster Loans for Small Businesses created emergency supplemental appropriations for fiscal year ending September 30, 2020. This legislation made $20 million available through the U.S. Small Business Administration (SBA) for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state's or territory's Governor, SBA will issue an Economic Injury Disaster Loan declaration for that state, and funds will then be available.

Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available to small businesses and private, non-profit organizations to help alleviate economic injury caused by COVID-19.

On March 19^th, 2020 Pennsylvania Governor Wolf announced "economic injury disaster relief" and Pennsylvania's small business eligibility for SBA EIDL funds.

These loans may be used to pay fixed debts, payroll, accounts payable, and other bills that can't be paid due to the impact of the disaster. The interest rate is 3.75% for small businesses who do not qualify for credit from other lenders; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.

Due to the emergency nature of the needed funds, these loans provide up to $10,000 in advance funds and up to $2 million in total borrowing capacity per business. SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower's ability to repay.

The SBA has streamlined the process of determining eligibility with a COVID-19 Economic Injury Disaster Loan Application. You must be a Pennsylvania business or nonprofit with less than 500 employees or an SBA-approved small business with more than 500 employees. Farms are not eligible for EIDLfunds, unless they are an agricultural cooperative, aquaculture enterprise, nursery, or producer cooperative.

Agricultural cooperative means those cooperatives acting pursuant to the provisions of the Agricultural Marketing Act [12 U.S.C. 114(j)] and Section 3(j) of the Small Business Act. North Carolina Cooperative Extension provided the public a great article outlining the regulation around farm designation and disaster relief (EIDL) assistance.

You can determine your cooperative or food business eligibility through this online SBA Size Standards Tool.

In addition, employers, including those that have been ordered to close, who keep workers on their payroll through the crisis, should understand that applying for the EIDL funding would make them ineligible to apply for the Paycheck Protection Program provided under the CARES Act for the same expenses. However, EIDL funds may be used to cover some business expenses during the outlined time period that are not eligible under the Paycheck Protection Program which may provide funds for some businesses to sustain operations.

Pennsylvania businesses may obtain information and loan applications by calling the SBA's Customer Service Center at 1-800-659-2955 (1-800-877-8339 for the hearing impaired), by e-mailing disastercustomerservice@sba.gov, or by going directly to the SBA COVID-19 Economic Injury Disaster Loan Application webpage.