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Small Business Guidance on the SBA Economic Injury Disaster Loan Program

What It Is

As part of the recently enacted Coronavirus Preparedness and Response Supplemental Appropriations Act, the SBA, through the Economic Injury Disaster Loan program, is offering low-interest disaster recovery loans to small businesses (within the meaning of SBA rules) that have been severely affected by the COVID-19 pandemic.

  • Eligible applicants may qualify for working capital loans up to $2 million at interest rates of 3.75% for small businesses (businesses with credit available elsewhere are not eligible) and 2.75% for nonprofit organizations
  • Loan eligibility will be determined based upon size, type and financial resources of the business entity.
  • The loan funds may be used to pay fixed debts, payroll, accounts payable and other working capital losses experienced as a result of COVID-19.
  • The Loan repayment term may extend up to 30 years, determined on a case-by-case basis based on ability to repay.
  • All counties in Colorado are eligible as certified disaster declaration areas.

Application Materials

Applicants are required to complete the SBA loan application (SBA Form 5) as well as other information and forms, including Tax Information Authorizations for the applicant entity and its principals and affiliates, a Schedule of Liabilities and a Personal Financial Statement. The entity will also need to provide copies of its most recent Federal income tax return and income, balance sheet and cash flow statements. Other information may also be requested, such as monthly sales figures.

CARES ACT

On March 25, 2020, the White House and Senate agreed to a version of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  CARES is a $2 trillion stimulus package which will provide $250 billion in direct payments to individuals and families, $350 billion in small business loans, $250 billion in unemployment benefits, and $500 billion in loans to distressed companies.  CARES also expands the SBA’s 7(a) loan program (its primary small business loan program) for a period from February 15, 2020 to June 30, 2020 to provide loans to a broader definition of small businesses. Features of the lending program include no collateral or personal guarantee requirements, loan forbearance and indebtedness forgiveness provisions, waivers of certain SBA fees, and broadening the Economic Injury Disaster Loan program, as well as certain requirements borrowers must meet. Recipients of Economic Injury Disaster Loan Program loans are not precluded from applying for a loan under the expanded 7(a) program (although they cannot use loan funds for the same purposes as loan funds received under the disaster relief loan program except under limited circumstances).

More Information

Applications may be submitted online (recommended). The application deadline is December 17, 2020. Visit https://disasterloan.sba.gov/ela/Information/Index for more information.

Linden Law Partners, LLC is dedicated to helping our clients navigate the various resources available to business owners during these rapidly evolving economic times. Please contact us here with any questions you have or to see how we can further assist you.

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Linden Law Partners

Linden Law Partners is a boutique law firm that represents clients throughout their business life cycles, from formation to exit. We are business and transactional law specialists with extensive experience in all aspects of corporate law and governance, partnerships, joint ventures, emerging companies, private equity and venture capital, private and public securities offerings, and mergers and acquisitions. We offer clients big firm experience at a better price.

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