SBA Offers Federal Disaster Loans

March 23, 2020

By: Eric N. Fischer

The U.S. Small Business Administration (“SBA”) is offering low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the coronavirus. Prior to accepting a loan from the SBA, it is important to consider the terms of the loan, the availability of other financing and your ability to repay the loan.


The SBA issues an Economic Injury Disaster Loan declaration after a request is received from a state’s or territory’s Governor. Currently, more than 30 states (including Iowa) are eligible for the federal disaster loans (an updated list is available on the SBA website. The SBA issued an Economic Injury Disaster Loan declaration for Iowa on March 21, 2020.


The loans are available to small businesses (500 or fewer employees), private nonprofit organizations of any size and small agricultural cooperatives that have been financially impacted as a direct result of the coronavirus.


Loans up to $2,000,000 are available for eligible businesses and nonprofits. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the impact of Coronavirus. The interest rate on the loans is 3.75% for small businesses and 2.75% for nonprofit corporations. The terms of the loans are up to thirty years, based upon the borrower’s ability to repay the loan. The deadline to apply for an Iowa loan is December 21, 2020.


For loans in excess of $25,000 the SBA may require collateral and/or a personal guarantee from owners with more than a twenty percent (20%) ownership interest in the applying business. We recommend considering the effects of collateral pledges and personal guarantees prior to applying for and accepting funds from the SBA.


The SBA encourages applicants to apply online for a disaster loan. If you have any questions or need assistance in applying for an Economic Injury Disaster Loan please contact us.