economic disaster loan

Economic Injury Disaster Loan Program

The Hartford

Transcript

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Gene (00:02):

Hey everybody. This is Gene Marks and welcome to this week’s edition of The Hartford Small Biz Ahead podcast. Today I want to talk about a very big opportunity for you as a small business owner that’s running out in just a few weeks and the opportunity is the Economic Injury Disaster Loan program, or EIDL. This program is administered by the Small Business Administration at sba.gov. And it is a loan program for you. It was established, first of all, the economic injury disaster loans, you probably heard of them by now, they’d been around for years, decades even. They were really designed to primarily assist business owners that were in disaster areas or had suffered destruction because of hurricanes or floods or things like that. There was a special EIDL program that was set up specifically for COVID and you’re eligible.

Gene (00:57):

I mean to get an Economic Injury Disaster Loan, you don’t have to prove any employee numbers or revenue decreases or whether or not you are shut down or locked down by COVID. If your business was in a federal disaster area and the entire country is still a federal disaster area, then you’re eligible for an Economic Injury Disaster Loan. And right now as I’m talking to you in late November, there’s still like a hundred billion dollars left in this program and it’s going to expire at the end of the year. And it’s financing for you. There’ve been some tweaks made to this program that has special considerations, special benefits for your business. And this is something you really should be considering. So let me just give you some thoughts on the Economic Injury Disaster Loans. For starters, go to sba.gov and look at what the loan program is.

Gene (01:52):

It’s right there on their homepage. It’s a 30 year fixed loan. The rate of interest is 3.75% for for-profit businesses. And 2.75% for nonprofit businesses. You can borrow up to $2 million on these loans. Now, depending on the levels that you’re at, you might have to provide evidence of collateral or even personal guarantees, but just think about it. If you borrow even like a hundred thousand dollars on a loan, your loan payment would be about 500 bucks a month, over 30 years. It’s fixed as a maturity and the interest rate is fixed. Now you might also say like, well, 3.75% interest still seems a little bit higher than what we’re seeing right now. Well, my response to that, first of all, is that it’s mostly marketable. It’s pretty equitable, but more importantly, do you not think, every business owner that I speak to, we know that because of inflation right now, interest rates are going to be going up in the next year.

Gene (02:52):

There’s no question about that because that’s what the fed is going to need to do to counteract the effects of inflation and to try and tamp down the demand on money that’s been provided all this liquidity from all these stimulus bills. So believe me, when I tell you that interest rates are going to be going up. And I think they’re going to be going up significantly more than the 3.75% in these loan deals. So think about that. You can refinance and get your loans at 3.75% for 30 years. And I bet you, that loan itself, that interest rate will look pretty darn attractive in the future. So I really want you to consider this, okay. This is a really, really big deal. Now, in addition to the lens, I have to also make sure you’re aware of this.

Gene (03:34):

There was a tweak made by president Biden when he announced all of the vaccine mandates. That’s what got all the news, but there was a tweak that was made to the Economic Injury Disaster Loan program and listen up. Now, if you borrow money under this program, you are now allowed to use those funds to pay off existing debt. So before you could only use it for working capital purposes or to buy equipment or things for your business. Now, you can use it to pay off existing debt. So if you’ve got loans that are outstanding at a higher rate of 3.75%, or you’ve got loans outstanding that are going to be a, rates will probably go up because they’re variable or you want to free up some capital with some inexpensive long-term fixed debt. You can use these economic injury, disaster loans to do just that.

Gene (04:24):

So you really want to consider that as part of your plans. Now, the Economic Injury Disaster Loan program also has special grants. You can get a grant, free money, not a loan, just a check from the government of up to $15,000, if you do meet certain criteria. So what is the criteria? Well, you need to be in a low income area, a low income community. And if you go to the SBA site, sba.gov, there is a calculator. There’s a mapping tool that will determine whether or not your business is in a low income community. If you are located there, then you can get an initial $10,000 grant for working capital and other expenses. You do not have to repay it. If your business eligibility, if your business can demonstrate that you’ve had more than a 30% reduction in revenues during any eight week period beginning on March 2nd, 2020 compared to the prior year of 2019.

Gene (05:29):

As long as you have less than 300 employees, you can be eligible for this $10,000 grant. If you’re very small, if you’ve got less than 10 employees and your business had a 50% revenue loss, again, during any eight week period after March 2nd, 2020, compared to 2019, you can get an additional 5,000 bucks. And by the way, if you’ve previously gotten money from the Paycheck Protection Program, the Restaurant Revitalization Fund, the Shuttered Venue Operators Grant, you can still apply for these grants and loans through the SBA. I’ve been advising my clients to revisit these programs now, while there’s still time. Many clients of mine don’t realize that they’re eligible. And the cost of capital, particularly in this inflationary environment is pretty attractive. Many other businesses in low-income areas around the country, they don’t seem to realize that they’re also eligible for grants, which it’s going to be money that you can use for payroll and operating cost increases.

Gene (06:30):

It’s a shame to leave this money on the table. And the SBA is trying very, very hard to make the application process as simple as possible. I spoke to SBA administrator, Isabella Guzman, a few weeks ago. She’s telling me that they are pushing this program hard. They’re trying to get the money out. So here’s my recap. Before the end of the year, go to sba.gov, apply for an Economic Injury Disaster Loan. Use the proceeds for working capital or to pay off existing loans. If you’re in a low income area and you meet certain other requirements, get those grants. It’s free money from the government, 15 grand that you can get and put in your pocket. Take advantage of these now. These programs are going to expire on December 31st of this year. So time is running out. I hope this advice helps you. I know it’s helped a lot of other of my clients, so I hope you take advantage of this as well. You have been listening to The Hartford, Small Biz Ahead podcast. My name is Gene Marks. Thanks for listening. We’ll be back next week with another segment. Take care.

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