The U.S. Small Business Administration has announced a new streamlined process for small businesses eligible for low-interest disaster assistance loans as a result of the COVID-19 outbreak.
“Our goal is to ensure that credit is available to any and all small businesses that need credit but are unable to access it on reasonable terms through traditional lending channels,” Jovita Carranza, the administration of the SBA, said in a statement revealing what is being described as a “relaxed criteria.”
That criteria will allow states to apply for emergency support simply by certifying that at least five small businesses have been economically injured as a result of the disaster in question.
Previously, SBA rules mandated that states could only apply for assistance by certifying that the affected businesses were located in five different counties.
In addition, the SBA is foregoing the requirement that those businesses must exist within counties identified by a state as a disaster area.
Now, according to an SBA press release, “disaster assistance loans will be available statewide following an economic injury declaration.”
This new ruling will apply to all current and future disaster assistance declarations specific to COVID-19.
The loans, as define by the SBA, are designed to provide working capital. With an interest rate of 3.2 percent the loans can be applied to a business’s debts, accounts payable, or payroll obligations.
While the terms of each loan will be worked out on a case-by-case basis, they will all likely allow for a 30-year repayment window.
Altogether, the SBA is expected to offer more than $8.3 billion in COVID-19 related loans.
In a column written for The Hill publication, Rhett Buttle, senior fellow at the Aspen Institute, and Katie Wonnenberg, vice president of the National Association for the Self-Employed, noted that small businesses today employ around 47 percent of the private workforce.
Those businesses are most often made up of auto repair shops, independent retailers, restaurants, and smaller architectural and engineering firms.
Buttle and Wonnenberg argue that any disruption along the lines of COVID-19 could prompt such businesses to “close or take on more debt through high-interest lenders.”
By Garry Boulard
