In downtown St. Cloud, as in towns all over America, streets are empty and shops are closed as people heed the CDC’s advice to avoid close personal contact. For small businesses, especially those dependent on foot traffic, social distancing has disrupted their revenue stream, leading to layoffs and, in some cases, closure.

Fortunately, the U.S. Small Business Administration is working with state governors to provide Economic Injury Disaster Loans (also called EIDLs) to small businesses, small agricultural cooperatives, and non-profits suffering a substantial economic injury due to coronavirus. These low-interest loans provide up to $2 million in vital economic support, based on actual economic injury and the business’s financial needs.

EIDLs may be used to meet payroll obligations, to settle outstanding debts and accounts payable, to pay bills—essentially, to cover ordinary and necessary operating expenses. For our construction clients, EIDLs may be necessary to sustain the business as coronavirus depresses the housing market, limits capital access, and disrupts the supply chain.

Terms of repayment are determined on a case-by-case basis. The longest potential repayment period is thirty years. For small businesses without credit available elsewhere, the interest rate is 3.75%; businesses with credit available elsewhere are ineligible. The interest rate for non-profits is 2.75%.

There are caveats to keep in mind: EIDLs are federal. As a consequence, the loan approval process is complex and time-consuming. The wait may be even longer if the volume of applications overwhelms the limited capacity of the government to manage. Also, the EIDL regulations impose a maximum unsecured threshold of $25,000.00. If the loan exceeds that amount, the SBA may require the borrower to provide a lien, a security interest in personal/business property, or both.

For further information on EIDLs and other ways for small businesses to weather the coming storm, we have a large team of business law attorneys who are here to help you. Give us a call at 320-251-6700.