Updated May 5, 2020
Economic Injury Disaster Loan Overview
The Economic Injury Disaster Loan (EIDL) is a working capital loan program offered by the U.S. Small Business Administration (SBA) to support small businesses through temporary revenue losses after disasters. Small businesses may borrow up to $2 million, and may use the loan to cover financial obligations and operating expenses that could not be met due to a disaster. In response to the COVID-19 emergency, small businesses may apply for an advance of up to $10,000.
Who Can Apply:
Small businesses with 500 or fewer employees, private non-profit organizations, or 501(c)(19) veterans organizations; or businesses that have more than 500 employees but meet the SBA industry size standard. Sole proprietors, independent contractors, and self-employed persons are eligible.
EDOs: EIDL Resources You Can Provide for Businesses
EDOs can serve as key sources of information for small businesses looking to access funding. Here are resources you can provide for EIDL assistance:
- Overview of EIDL and link to SBA
- Information for borrowers: Disaster Loan Assistance Fact Sheet, Disaster Loan Three Step Process
- Answers to frequently asked questions: U.S. Senate Committee on Small Business and Entrepreneurship CARES Act FAQ
- EIDL guides: U.S. Chamber of Commerce Foundation Guide to EIDL, EIDL vs. PPP Guide
- Links to your local SBDC
- Application links: COVID-19, other Disasters
- Guidance for businesses preparing to apply (financial history statements, average monthly payroll calculations, etc.)
- Outreach - do your local businesses know you can assist with EIDL?
Paycheck Protection Program Overview
The Paycheck Protection Program (PPP) is a loan incentive through the Small Business Administration (SBA). Through PPP, SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. Small businesses are eligible to borrow up to 250 percent of their average monthly payroll expenses, up to a total of $10 million. The loan covers an eight week period.
Businesses should apply through an existing SBA 7(a) lender or other improved institutions such as a federally insured depository institution, federally insured credit union, or Farm Credit System institution participating in the program. SBA’s Find a Lender is a useful tool for locating eligible lenders.
PPP will be available between April 3, 2020 and June 30, 2020.
Who Can Apply:
Small businesses, 501(c)(3) non-profit organizations, 501(c)(19) veterans organizations, or Tribal businesses, with 500 or fewer employees, or businesses that have more than 500 employees but meet the SBA industry size standard. Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location is also eligible. Sole proprietors, independent contractors, and self-employed persons are eligible. SBA’s Franchise Directory is a useful tool for evaluating eligible applicants.
EDOs: PPP Resources You Can Provide for Businesses
EDOs can serve as key sources of information for small businesses looking to access funding. Here are resources you can provide for PPP assistance:
- Overview of PPP and links to SBA and U.S. Treasury
- A list of approved local lenders in your community
- Answers to frequently asked questions: SBA FAQ, U.S. Senate Committee on Small Business and Entrepreneurship FAQ
- Information for Borrowers
- Information for Lenders
- Links to your local SBDC
- Sample borrower and lender application forms
- Guidance for businesses preparing to apply (financial history statements, average monthly payroll calculations, etc.)
- Outreach - do your local businesses know you can assist with PPP?
Business continuity planning is the process of considering how a business will stay in operation in the event of a disaster - natural or manmade - and that includes COVID-19. Continuity plans look at the effect of interruptions on supply chains, production capacity, and cash flows, considering alternatives and strategies for protecting operations, assets, and personnel. This should improve a business’s ability to respond and recover from threats, emergencies, or disasters. Business continuity planning builds resilience both for the business and the larger community.
Economic development organizations (EDOs) and chambers of commerce are often leaders in these economic recovery efforts. An EDO’s business continuity plan will include operational continuity as well as planning for its role in disaster response and recovery. Many local governments and EDOs are taking action during the COVID-19 crisis to promote business continuity.
Business Continuity Assistance for COVID-19: Examples from the Economic Development Community
Economic development organizations across the country are mobilizing to become go-to information sources for their communities and businesses. Many EDOs are supporting business continuity by providing resources such as checklists, emergency management guides, updates on essential services, and available financial assistance.
NYC Small Business Services Guidance for Businesses Impacted by Novel Coronavirus - The city has organized continuity checklists, paid sick leave information, and resources on business emergency preparedness and recovery, including webinars and workshops.
Vermont ACCD COVID-19 Guidance for Vermont Businesses - The Vermont Agency of Commerce and Community Development lists information on current financial impacts, news and updates through its Business and Economic Response to COVID-19 Newsletter, and provides resources for businesses such as the Vermont SBDC’s Disaster Recovery Guide for Businesses and financial assistance opportunities.
Greater New Orleans Inc. Coronavirus Updates - GNO Inc. lists information on available financial assistance, community-specific updates, and comprehensive best practices and tips for businesses on topics such as pandemic planning, business resiliency planning, and employer guidelines.
San Francisco OEWD COVID-19 Assistance and Guidance for Businesses and Workers - The Office of Economic and Workforce Development provides updates and news on the city’s response, as well as updated lists of available financial resources, legal assistance, and leave programs.
Maryland COVID-19 Information for Businesses - Maryland Business Express has announced the state’s orders for COVID-19, and lists comprehensive information on employer/worker assistance, financial assistance and taxes, licenses and permitting, and enforcement.
Massachusetts COVID-19 Guidance and Resources for Businesses - The State of Massachusetts has provided lists of funding opportunities, available workforce assistance such as the Rapid Response Program, and updates on emergency orders.
Rhode Island Commerce - RIC has provided resources such as technology assistance, workplace preparations, and a business planning checklist, while also providing guidance to additional COVID-19 resources from the RI Department of Health.
Arlington County COVID-19 Response - To keep businesses and community members informed during this time of rapid change, Arlington County released a statement highlighting modifications to essential services, including infrastructure, public safety, and economic development services
Los Angeles Economic Development Corporation Coronavirus Response Page - LAEDC provides a COVID-19 updates webpage, with resources for businesses struggling with disruption and workers experiencing lost income, as well as detailed information on COVID-19’s economic impacts for Los Angeles.
City of Toronto COVID-19 - The City provides a daily media briefing with information on public health and closures. Additionally, the Mayor has launched the Economic Support & Recovery Task Force to mitigate the economic impacts of the COVID-19 pandemic. Other specific measures include extending grace periods, employee protections, establishing a contingency fund, assisting access to Employment Insurance, and expanding small business advisory services.
Business Continuity Planning: Important Steps
Even very simple steps, such as having contact information for membership and key industry leaders at the ready (cell numbers and email addresses), can greatly enhance an EDO’s effectiveness during a disaster.
EDOs need to understand what critical, internal business functions are required in order to continue operating.
Typically, the critical business functions are those functions that
(1) are most sensitive to downtime,
(2) fulfill legal or financial obligations to maintain cash flow,
(3) play a key role in maintaining your business’ market share and reputation, and/or
(4) safeguard an irreplaceable asset.
The following checklist can help your organization determine these critical functions:
• Identify the critical and time-sensitive business functions of your organization.
• Classify these critical business functions into the following categories: high (most severe), medium, and low (least severe).
• How much downtime can I tolerate for each business function?
• Which business functions are necessary to fulfill my legal and financial obligations?
• Which business functions are essential to maintain my market share and reputation?
Considerations when Determining Criticality of a Function:
• What is my organization’s core business?
• What would be the consequences if I lose or do not have access to my...
-- Contents/ inventory
-- People (employees or customers)
-- Vital records
-- Support Systems (computers, networks, communications, transportation)
Other essential business continuity and preparedness activities include:
• Review checklists of necessary supplies for disaster response
• Understand your organization’s insurance plan
• Identify a backup location and/ or develop telework arrangements for staff
• Establish a backup data location for your organization
• Collect contact information (for employees, key business contacts, etc.)
Business Continuity Resources
Example Continuity Plans and Announcements
Faced with significant disruptions, layoffs, and revenue losses, small businesses will struggle to maintain operations throughout and after the COVID-19 pandemic. For many, access to financial assistance will be essential to their survival. Many organizations are mobilizing quickly in response to COVID-19 to provide resources and funding opportunities for impacted businesses.
General Financial Assistance Resources
For businesses and nonprofits looking to access financial support through the recently passed CARES Act, the U.S. Chamber of Commerce Foundation has put together a short guide on eligibility and accessibility: Coronavirus Emergency Loans: Guide and Checklist for Small Businesses and Nonprofits.
Financial Assistance for COVID-19: Examples from the Economic Development Community
GEDP COVID-19 Business Recovery Loan - Three local Galveston banks have come together to offer short-term, low interest loans as gap financing for impacted businesses, similar to a program offered by the same banks following Hurricanes Ike and Harvey.
New Orleans Business Alliance Gig Economy Relief Fund - $100,000 initial fund to meet needs of impacted gig economy workers.
Seattle Business Stabilization Fund - The City of Seattle will commit approximately $1.5 million in one-time Community Development Block Grant (CDBG) funds to the Small Business Stabilization Fund, an emergency fund that provides working capital grants in amounts up to $10,000 to qualifying small businesses.
San Francisco OEWD Small Businesses Resiliency Fund - Allows impacted small business owners to access up to $10,000 for employee salaries and rent.
Florida Small Business Emergency Bridge Loan - Short-term, interest-free working capital loans of up to $50,000 per eligible small business.
United Way of Rhode Island and Rhode Island Foundation COVID-19 Response Fund - $1.5 million in grants to support nonprofits across the state.
Massachusetts Small Business Recovery Loan Fund - $10 million fund will provide emergency capital up to $75,000 to Massachusetts-based businesses impacted by COVID-19 that have 50 or fewer full- and part-time employees, including nonprofits.
San Francisco Give2SF Fund - Established by Mayor Breed, this fund accepts tax-deductible donations to help small businesses.
United Way Worldwide COVID-19 Community Response and Recovery Fund - Fund supports local United Ways and 211, a go-to information resource in times of crisis. 211 accepts requests by phone, text, chat and email to connect people with disaster, food, housing, utility, health care resources and more.
Facebook COVID-19 Small Business Grants - $100 million program will provide grants, available for up to 30,000 eligible small businesses in over 30 countries.
SBA Economic Injury Disaster Loan - The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19).
Detroit Small Business Stabilization Fund - To mitigate barriers to capital for Detroit’s most vulnerable businesses, TechTown Detroit will administer an emergency fund that provides working capital grants in amounts up to $5,000 to qualifying small businesses.
Ventura County Rapid Response Fund - Ventura County Community Foundation, in coordination with the County of Ventura, Amgen Foundation, Southeast Ventura County YMCA, Give An Hour, and the Economic Development Collaborative, has launched the Ventura County Rapid Response Fund to support small businesses, individuals, and families.
Los Angeles City Small Business Emergency Microloan Program - The Los Angeles EWDD established this microloan program to strengthen small business enterprises affected by COVID-19, providing loans between $5000-20,000.
For your reference, we have defined common types of financial assistance below. More information can also be found on the Business Financing page and in our publications, Case Studies in Small Business Finance Following a Disaster and Case Studies: Revolving Loan Funds for Disaster Recovery.
Revolving loan funds (RLFs) are self-replenishing lending tools. Built upon an initial capitalization, RLF funding is recycled as loan recipients make payments. As loans are repaid, the returns to the loan pool can be lent out again to another recipient. Most RLFs provide small to mid-sized loans. RLFs can be established using federal funds (EDA and HUD provide RLF funds) or state/local funds (such as the Louisiana Revolving Capital Fund). The EDA Revolving Loan Fund Program awards competitive grants to local and state governments and other development organizations to establish RLFs. HUD’s CDBG program can also be used to fund RLFs.
Bridge loan programs provide working capital to businesses after a disaster, before the business can access funds from other sources like insurance claims, renewed profits, and federal financing assistance. The idea is that the bridge loan can be paid back after the business has received these other sources of funding.
Business grant programs target particularly devastated businesses. A grant or forgivable loan can help speed recovery when a business is uncertain about incurring more debt. Funding for this program typically comes from state and local resources. For example, the State of Iowa created the Jumpstart Iowa Small Business Assistance Program to provide short-term financing to small businesses before an anticipated $85 million CDBG grant was scheduled to be disbursed.
Private and nonprofit community development financial institutions (CDFIs) and other small business assistance providers can play a critical role in nimbly and quickly deploying funds, but they have limited resources with which to do so. With the appropriate capital, loan loss and operating support, these private financial partners can assist small businesses through the lingering effects of a catastrophic event, particularly at a time when the market is unwilling to invest with so many unknowns.
Steps for setting up a loan fund:
• Explore options before a disaster hits
• Conduct assessment of local capital market
• Establish goals for fund
• Establish operating procedures
• Create an advisory board
• Set up loan monitoring process
• Obtain capitalization funding
• Launch the fund
Supporting Your Local Business While the Doors Are Closed
Small businesses are an essential part of the nation’s economy, and as people are advised to remain indoors, these businesses are facing dramatic loss of sales. Fortunately there are ways to continue to support small businesses - perhaps not at the same level as before the pandemic - but hopefully in a way that generates some revenue.
A few ways EDOs can advise their small business community to tap sources of capital or revenue:
• Share info and resources for Small Business Administration loans - Many states already have disaster declarations and all likely will be declared soon. Business owners will need clear and concise instructions on applying for loans. Make sure to post/share info on SBA’s program. And engage your network of technical assistance providers (Small Business Development Centers) now, to make sure you and they are ready for when applications start arriving.
• Consider Bridge/Gap Funds - There’s going to be a rush on SBA loans and it takes time to get money in the hands of business owners. EDOs, such as the Galveston Economic Development Corporation, have launched bridge/gap loans, to more quickly get money in the hands of business owners. Though not necessarily easy to set up quickly, this can be a successful tactic to keep businesses operating until more substantial funds come their way.
• Build and update a list of local businesses still operating. Currently, some businesses are still open, but only taking online orders, or in the case of restaurants, only open for delivery/take-out. Offering a listing of businesses is helpful to customers. The Downtown DC BID has an example of an updated list.
• EDO’s can also help businesses by reminding customers to shop local. While many are closed. And while customers are staying indoors, sales can continue in several ways, such as online/phone orders, the purchase of gift cards, take-out or delivery, or even encouraging customers to donate to their favorite small businesses. In these uncertain times, any creative ways to drive revenue will be a help.