A U.S. Small Business Administration loan program for businesses that have lost an essential employee to active military duty has become more accessible and helpful for borrowers.
The changes to the Military Reservist Economic Injury Disaster Loan, a direct working capital loan, come in response to the Small Business Disaster Response and Loan Improvements Act. The law was passed in May, but these provisions did not take effect until now.
As of Tuesday, a small business can apply for a loan on the date its owner or other essential employee gets notice of a call-up to active duty. And they can still apply until one year after the employee is discharged from active duty, versus just 90 days before.
In the past, a business had to put up collateral for loan amounts over $5,000, but now collateral will not be required for loans of $50,000 or less. And the maximum loan amount has been raised to $2 million from $1.5 million.
Funds from the loan may be used to cover operating costs until the employee or owner leaves active duty. Terms are up to 30 years and the interest rate is 4 percent.
An essential employee is defined as someone whose managerial or technical skill is needed for the successful daily operation of the business.