SBA Economic Injury Loans Help Answer Business Needs
Release Date: November 1, 2002
Release Number: 1435-106
» More Information on Louisiana Tropical Storm Isidore
Baton Rouge, LA -- The U.S. Small Business Administration (SBA) has made 130 low-interest loans totaling $1,100,500 to replenish working capital for Louisiana small businesses as a result of income loss caused by the dual assaults of Tropical Storm Isidore and Hurricane Lili.
SBA spokesperson Michael Lampton today said the special SBA loans were made because of economic injury problems associated with the disaster and do not involve actual physical damage to the businesses.
He said debris-choked, flooded roadways caused a number of businesses to suffer a serious revenue loss that normally would have been used to pay off long-term commercial loans that were due.
Lampton said small businesses and small agricultural cooperatives that have experienced substantial economic injury resulting from a physical disaster, or from an agricultural production disaster so designated by the Secretary of Agriculture, might be eligible for the SBA's Economic Injury Disaster Loan (EIDL) program.
He said EIDL loans, which may go as high as $1.5 million at an interest rate that can't exceed 4 percent, can be made for up to 30 years. Here are the special disaster loan program's high points:
- The EIDL's purpose is to provide operating funds until a damaged business can recover. Under certain conditions, the loan may be used to make payments on short-term notes, accounts payable and installment payments on long-term notes.
- You may request an EIDL for the amount of economic injury and operating needs, but not in excess of what your business could have paid had the disaster not occurred.
- Private credit sources, including banks, must be used as much as possible to overcome the economic injury. The SBA can provide EIDL assistance only to the extent the business and its principals cannot recover by using its own resources and normal lending channels.
- EIDL cannot be used to pay cash dividends or bonuses, or for disbursements to owners, partners, officers or stockholders not directly related to the performance of services for the business.
- EIDL funds cannot be spent to help maintain a secure financial condition until your business is back to normal. Your loan will be made for specific and designated purposes. Remember that the penalty for misusing disaster funds is immediate repayment of one-and-one-half times the original amounts. The SBA requires that every recipient of a loan keep receipts and good records.
- If the business is located in a special flood hazard area, it must have flood insurance before the SBA can make a loan. If the business was legally required to maintain flood insurance but did not, a disaster loan will not be made.
For additional information on the economic injury loan program, call 800-U ASK SBA.
Last Modified: Thursday, 24-Jul-2003 16:13:42