The ongoing COVID-19 pandemic left a huge financial impact on small businesses worldwide. Many businesses got shut down due to operational inefficiencies or lack of finances. In response, the US government launched economic injury disaster loan assistance for small businesses, including agricultural businesses and nonprofit organizations. The economic injury disaster loan options are primarily designed to provide economic relief to small businesses facing the loss of revenue due to the pandemic. However, there are some set standards that a small business must abide by to avail economic disaster loans. Let us have an insight about these funding options.
Who can avail or apply for economic injury disaster loans?
In order to apply for COVID-19 related economic injury disaster loan, the business must be located within us or a designated territory. Furthermore, there should be significant suffering of working capital loss due to the ongoing pandemic. Here are some standard criteria that The Eligible applicants must abide by:
- The business can at most have less than or equal to 500 employees.
- Most private nonprofits
- Faith-based organizations
- Independent contractors
- Sole proprietorships
What are the benefits of economic injury disaster loans?
- Even large or small scale businesses can face huge financial losses with a few non-operational days. In these times, businesses require large loan amounts to fill the gap. These large loan amounts are difficult to obtain elsewhere, but economic injury disaster assistance provides huge loans to businesses.
- Another prominent benefit of opting for economic injury disaster loans is availing lower interest rates on the loan amount. Unlike availing loans from banks or credit unions, the economic injury disaster loans come with lower interest rates, saving you thousands in the complete loan life cycle.
- Since the businesses are slower or non-operational during the pandemic, it becomes affordable for businesses to repay the loan amount in a short duration. Long repayment tenures are what attracts most borrowers or small business owners. As the complete loan amount gets spread evenly over the complete loan life cycle, the monthly payments are comparatively lower.
- In addition, the borrowers do not have to worry about additional loan application fees, prepayment fees, origination fees or other added expenses as there are none.
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What are some lesser-known facts about economic injury disaster loans?
If your business has experienced a financial setback during the ongoing COVID-19 and requires a loan over $25,000, You can readily opt for economic injury disaster loans. However, you must be aware that a loan amount more than $25,000 will require the borrowers or businesses to provide collateral as a security for the loan amount. This collateral can be anything such as machinery or equipment associated with the business. The borrowers must note that economic injury disaster loans are not forgivable, but you can make payments if they are deferred one year.
Now that you are aware of the ins and outs of economic injury disaster loans, you must minutely analyze the financial health of your business before opting for this small business funding option.
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