SBA Disaster Loans Available In Some States, While Congressional Proposals May Increase SBA 7(a) and Express Loan Availability 

State governments, as well as members of Congress, are taking action to increase the ability of SBA loans for small businesses affected by the spread of the COVID-19 coronavirus. One of the largest initiatives is the Economic Injury Disaster Loan Program, which can provide access to working capital for businesses in designated disaster areas. In order for an area to become a designated disaster area, the governor of a state must apply to the SBA. If and when the SBA approves, federal disaster loans will be available for eligible small businesses in the disaster area. 

Economic Injury Disaster Loans are provided in amounts up to $2 million, with interest rates currently set at 3.75%. Nonprofit organizations qualify for a reduced interest rate of 2.75%. The approval process takes approximately 14-21 days, while borrowers generally need to wait an additional 5 days for the funds to be disbursed. These loans may be especially helpful for businesses like bars and restaurants, which have been required to close for dine-in customers in major cities, including New York and Los Angeles. 

Economic Injury Disaster Loans Are Currently Available In States Including New York, Maine, Pennsylvania, and Connecticut

While SBA Economic Injury Disaster Loans are only available in states where a disaster has been declared by the governor and approved by the SBA, an increasing number of states are fitting that bill. As of this article’s publication date, SBA disaster zones have been declared in states including New York, Maine, Pennsylvania, Connecticut, Colorado, Texas, Utah, California, Washington, Idaho, Oregon, Maine, New Hampshire, Connecticut, Massachusetts, Rhode Island, Nevada, Arizona, Washington D.C., Maryland, Virginia, New Mexico, Montana, North Dakota, and Wyoming. A full list of SBA disaster zones can be found here. 

More states are likely to become declared disaster zones within the upcoming days. Governors in Kansas, Ohio, and North Carolina have recently announced that they’ve asked the SBA to declare a disaster zone in their states.

Traditional SBA Loan Programs May See An Increase In Lending Authority

While SBA Economic Injury Disaster Loans are likely to be an essential source of funding for local businesses in the coming days and weeks, they’re not the only source of SBA funding that small businesses can utilize in these challenging times. The SBA 7(a) and SBA 7(a) Express Loan programs may also be a viable funding option, particularly if proposed legislation is passed that would expand the scope and availability of these programs for small business borrowers across the United States. 

Two major Congressional proposals have been made to expand the program: Florida Senator Marco Rubio’s proposed bill would boost the SBA 7(a) program’s mandate from $30 billion to $80 billion, as well as increasing the SBA Express program’s maximum loan amount from $350,000 to $1 million. In comparison, Democratic Rep. Nydia Velazquez of New York’s alternative proposal would permit the SBA to provide direct loans to small businesses. These would come in the form of 10-year, 0% interest loans in amounts up to $2.5 million. However, prominent SBA lenders are concerned that it could take months for the SBA to issue funds directly to borrowers. In traditional circumstances, SBA Express Loans are funded in between 30 and 60 days, while 7(a) loans may take somewhat longer. 

In addition to SBA disaster financing, and conventional SBA 7(a) and SBA Express Loans, borrowers may also be able to utilize the SBA’s Express Bridge Loan Pilot Program, which allows the SBA to directly provide loans up to $25,000 to small businesses in designated disaster areas. 

Borrowers in eligible states should apply for loans at sba.gov, and may also want to visit the Small Business Administration’s Coronavirus (COVID-19) assistance page.