Low-Interest Loans On The Way For Small Businesses In Coronavirus Crisis

The loans, says the SBA, "may be used to pay fixed debts, payroll, accounts payable and other bills that can't be paid because of the disaster's impact. The interest rate is 3.75% for small businesses. The interest rate for nonprofits is 2.75%."

Tennessee Gov. Bill Lee on March 18 requested that the U.S. Small Business Administration approve Economic Injury Disaster Loan assistance for Tennessee small businesses and nonprofit organizations.

Upon the SBA's approval of Lee's request, Tennessee small businesses and nonprofits can apply for the loans.

On a scale perhaps never before imagined, the SBA disaster loan program – which provides working capital loans of up to $2 million – is in place for eligible small businesses and private, nonprofit organizations being hammered by coronavirus precautions.

Travel restrictions and cancellations and elected officials' and health officials' orders or directions to practice social distancing and isolation are combining to bring about an unprecedented disease-related impact on the stock market, the supply chain, business operations and employees.

The SBA's low-interest loans are authorized (as of this writing) for the following states: California, Connecticut, Delaware, Florida, Georgia, Indiana, Maine, Massachusetts, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Rhode Island, Utah and Washington, as well as the District of Columbia. The list is certain to grow, and area businesses should be on the lookout for notification.

In a shift from past practice, a state or territory must certify only that at least five small businesses within their borders have "suffered substantial economic injury" related to the coronavirus. This change differs from the standard requirement that a minimum of five businesses be located within each county or parish declared eligible for the economic disaster loans.

The loans, says the SBA, "may be used to pay fixed debts, payroll, accounts payable and other bills that can't be paid because of the disaster's impact. The interest rate is 3.75% for small businesses. The interest rate for nonprofits is 2.75%." Repayment schedules can extend up to 30 years, with terms dependent on the borrower's ability to pay.

The SBA's Office of Disaster Assistance works with state or territorial governors on the disaster loan request. The SBA would then declare an Economic Injury Disaster Loan declaration, authorized by the Coronavirus Preparedness and Response Supplemental Appropriations Act passed by Congress and signed into law by President Donald Trump.

The SBA says that application information is disseminated in a state or territory's affected areas. Additional information is available at sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources, or sba.gov/disaster-assistance/coronavirus-covid-19 (at which loan applications can be made online), by emailing [email protected] or by calling the SBA Disaster Assistance Customer Service at 1-800-659-2955 (TTY: 1-800-877-8339).

How fast you get through or receive a response is another question, in a situation without precedent, on a scale yet fully to be measured.

As with any government program that releases money, there's red tape attached. Normally, applications are complex and take time and resources to ensure adherence to government rules. How much the coronavirus may cut through that tape will reveal itself in the coming days. If the system is slow and burdensome, and complaints pour in, chances are good there will be additional administrative rules relaxation.

Typically, these loans are available in the wake of such disasters as hurricanes, earthquakes, tornadoes and other disasters-as-designated. Though the incidents can be large, they are nevertheless limited in scope. The coronavirus's potential to dwarf even a hurricane, or series of hurricanes, puts it in a category of its own.

The financial outlay size is daunting to meet the demand the coronavirus is bringing to the country and its taxpayers. How that will play out in the long run for a nation nearing a $23 trillion national debt, and an annual deficit of about $1 trillion, is at the moment not on the radar: The crisis at hand dominates. And it's unprecedented.

Jimmy Rodefer is CEO of Rodefer Moss & Co., a four-state accounting firm with headquarters in Knoxville.

The loans, says the SBA, "may be used to pay fixed debts, payroll, accounts payable and other bills that can't be paid because of the disaster's impact. The interest rate is 3.75% for small businesses. The interest rate for nonprofits is 2.75%."

Jimmy Rodefer

Guest columnist