The U.S. Small Business Administration has issued a disaster declaration in Iowa, allowing small businesses (defined as having 500 or fewer employees) affected by COVID-19 to apply for low-interest federal loans.
According to a Saturday press release, the declaration follows a federal funding request made by Gov. Kim Reynolds to the SBA’s Economic Injury Disaster Loan program. According to the release, interest rates will be 3.75 percent for small businesses applying for these loans and 2.75 percent for nonprofits. SBA offers a variety of loans and repayment methods, terms being determined on a case by case basis. The declaration applies retroactively, beginning January 31.
In the press release, Reynolds said the declaration would be “vital” in alleviating the financial burden of COVID-19 on small Iowa businesses. She added that she plans on continuing to work with the Trump administration to decrease this impact.
The SBA Disaster Loans are available to small businesses as well as private and nonprofit organizations statewide and offer up to $2 million in assistance toward COVID-19 induced economic injury.
“These loans 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 release stated.
Applications can be submitted on the Small Business Administration’s website, and monitored online after submission.
Applying right away might not be the best decision
Many are advising that it might be wise to wait to apply, as federal legislation is pending for business interruption loans which will likely be unavailable to businesses that have already applied for disaster loans. Eric Engelmann, in a Medium post published yesterday, lays out some of the pros and cons of applying for SBA Disaster Loans.
“An SBA loan might be the only and best—if risky—way to get working capital to help weather these turbulent times,” writes Engelmann. “But you need to go into this with a level head and clear thinking to decide if it is right for you. I hope these thoughts were useful in your decision-making process.”
For those looking to learn more about the SBA Disaster loans, Jayne Armstrong of Iowa SBA will be holding a Business Resource Webinar on SBA Economic Injury Disaster Loans on March 25 at 3:30 pm.