By Liz Moomey

liz.moomey@salisburypost.com

SALISBURY — One option for small businesses across Rowan County suffering from impacts of the COVID-19 outbreak is a low-interest, federal disaster loan through the U.S. Small Business Administration.

The loans range from $25,000 to $1 million and have a repayment schedule of up to 30 years. Thomas Stith, North Carolina district director of SBA, said there are more than 900,000 small businesses throughout North Carolina employing 1.7 million.

“The SBA realizes, not only is this a critical time, to provide economic support for our small business community translates into more support or communities and families across the state,” Stith said.

Barbara Hall, director of Rowan Cabarrus Community College’s Small Business Center, recommended businesses that meet the qualifications go ahead and apply for the SBA’s Economic Injury Disaster Loan. Hall said business owners need to ask: “What is it that they really need to stay in business?”

The SBA loan is different than commercial loans because the interest rate is relatively low, 3.75% for small business and 2.75% for nonprofit organizations. Businesses also have a longer time to pay it back, Hall said. 

For example, for five years at 3.75%, the payment is $18.50 per thousand borrowed. For 10 years at 3.75%, the payment is $10.02 per thousand borrowed.

Another option is the SBA’s Economic Injury Disaster Loan, which is available for small businesses, small agricultural cooperatives, small aquaculture businesses and most private nonprofit organizations. This includes businesses directed affected by the disaster in question, businesses that offer services directly related to the businesses in a disaster declaration and other businesses indirectly related to the industry that are likely to be harmed by losses in their community.

The criteria for disaster loan approval is a credit history that is acceptable to the SBA, an ability to repay the loan and collateral. Collateral is not required for loans less than $25,000. Stith said lack of collateral will not be disqualifying.

The loan funds can be used for fixed debts, payroll, accounts payable and other bills that could have been paid. The funds are not intended to replace lost sales or profit or pay for an expansion.

The SBA will determine the amount of the loan, which Hall said takes a tough decision out to the hands of business owners. 

Hall recommends small business owners to sit down with accountants to look at their financials, their cash flow, income statements, balance sheet and see based on where they are financially how they would handle a loan.

“In a midst of a crisis, it is really difficult to decide what it is they should do,” Hall said. “They’re trying to keep their doors open. They’re trying to keep employees. Sometimes it’s better to get some counsel from someone who knows, especially on the financial end.”

Before applying, business owners should prepare for the application by printing a paper copy to review, gather the most recent three years of business tax returns, allow one hour to complete the application, be prepared to address past credit issues and list business owners with more than 20% ownership.

Business financial information needed includes projections of sales and business expenses, including long-term debt payments, rent, utilities, accounts payable, inventory and payroll for the next three to six months to determine the amount of estimated loss. Personal financial information needed is bank account balances, retirement account balances, stock information, list and values of automobiles, real estate and other assets.

Through the Economic Injury Disaster Loan program, small business owners are eligible of an advance up to $10,000 as part of what’s called Emergency Economic Injury Grants. The advance will provide economic relief to businesses experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, and this advance, or grant, will not have to be repaid. And if approved, funds are distributed and not repaid regardless of the decision about the loan application.

Hall said business owners generally want to stay open during and after the COVID-19 outbreak, and the SBA loans help with that.

“People want to hold onto their business. They have invested a lot into it,” Hall said. “They already have a customer base. That is really the last resort.”

Hall said currently there are not many grant options available. The Truist-NCIFund Grant application has closed after a high demand. Truist will announce additional resources that may become available. Facebook will have a small business grant, but the social media company has not begun accepting applications.

To apply for the SBA’s disaster loan, visit sba.gov/disaster/apply-for-disaster-loan. For COVID-19 resources provided by the Small Business Center, visit ncsbc.net.