RALEIGH – More financial relief for startups and small businesses are coming through actions taken by the Federal Reserve on Monday. This follows the news of last week that the US Small Business Administration is making loans up to $2 million for eligible businesses after it approved a “disaster declaration” for North Carolina.

The Fed made some key moves for small business, according to The Associated Press.

It has revived a program from the financial crisis in 2008 that will buy what’s called “asset-backed securities.” Those are simply multiple loans bundled together and sold as bonds. Buying the bonds will give banks cash to make loans to consumers.

The Fed also will buy bonds that are backed by auto loans, credit card loans, student loans, and some small business loans guaranteed by the Small Business Administration. Many of those lending markets have frozen up because no one will buy those securities, so the Fed’s move should get lending flowing to consumers and some small companies again. This facility will be more important when the virus-induced shutdown starts to ease and people venture out to buy cars and other large goods. This program is also capped at $100 billion, for now.

Startups, small businesses have new source for possible loans: Golden LEAF

Further, the Fed announced it would soon set up the “Main Street Business Lending Program,” but it did not provide much information about the timing.

The Fed “expects to announce soon the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA,” it said.

[For full details about the Fed’s moves, including other actions it says will support the economy, read the full announcement online,]

Joe Brusuelas, chief economist at financial analysis firm RSM, predicts that it will offer a very low interest rate, such as 2.25%, over five years with quarterly payments. This program would work with the rescue package that is currently under consideration by Congress. That legislation includes $425 billion to fund Fed lending efforts like the Main Street program. Michael Feroli, an economist at JPMorgan Chase, said that amount of money from Congress could support up to $4 trillion of lending by the Fed.

SBA loans in North Carolina

“The SBA can provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred,” the federal agency says at its website.

“Your loan amount will be based on your actual economic injury and your company’s financial needs, regardless of whether the business suffered any property damage.”

Small businesses can apply directly for the loans at this website.

However, the SBA says it is facing challenges – technical and demand.

“We are experiencing high volumes of traffic and the site might be slow. Non-peak hours are 7:00PM-7:00AM EDT,” the SBA says at its website.

“Some users are experiencing issues using Chrome. Please use an alternate browser – like Edge or Internet Explorer.”

Businesses also can get information through the SBA’s Customer Service Center at 1-800-659-2955 or 1-800-877-8339 for the deaf and hard-of-hearing, or by emailing disastercustomerservice@sba.gov.

Loan application forms can also be downloaded at disasterloan.sba.gov

CRITERIA FOR ECONOMIC INJURY DISASTER LOANS

Information from the SBA website regarding loan criteria:

If you have suffered substantial economic injury and are one of the following types of businesses located in a declared disaster area, you may be eligible for an SBA Economic Injury Disaster Loan (EIDL):

  • Small Business
  • Small agricultural cooperative
  • Most private nonprofit organizations
LOAN AMOUNTS AND USE

Substantial economic injury means the business is unable to meet its obligations and to pay its ordinary and necessary operating expenses. EIDLs provide the necessary working capital to help small businesses survive until normal operations resume after a disaster.

The SBA can provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. Your loan amount will be based on your actual economic injury and your company’s financial needs, regardless of whether the business suffered any property damage.

ELIGIBILITY AND TERMS

The interest rate on EIDLs will not exceed 4 percent per year. The term of these loans will not exceed 30 years. The repayment term will be determined by your ability to repay the loan.

EIDL assistance is available only to small businesses when SBA determines they are unable to obtain credit elsewhere.

A business may qualify for both an EIDL and a physical disaster loan.

The maximum combined loan amount is $2 million.

Source: https://disasterloan.sba.gov/ela/Information/EIDLLoans