On Thursday, March 26, the council will consider creating a local Economic Injury Disaster Program. The program would provide working capital loans up to $35,000 for Austin businesses that can demonstrate an economic injury associated with the COVID-19 pandemic. According to the City of Austin, the program is "designed to work as a gap financing in conjunction with an applicant's request for federal assistance."
"We recognize that for many local Austin businesses, the economic impact began with the cancellation of South by Southwest,” said Veronica Briseño, the director of the City of Austin's Economic Development Department. "Our intent for the proposed Economic Injury Disaster Loan Program is to address the economic impact to local businesses and provide support to retain employees until a recovery can begin."
At a press conference Saturday afternoon, Briseño said that as of right now, the requirements for the potential Economic Injury Disaster Program are that a business is located within the city of Austin and that it employs two to 100 employees. The City is also looking to specify industries, with current emphasis on the industrial, retail and distribution industries. Briseño said the new program is modeled after the City's existing Family Business Loan Program.
However, she also said the above requirements could be changed by the city council if they approve the program.
This announcement from the City comes one day after Texas received a federal disaster declaration for COVID-19. Texas small businesses, nonprofits, homeowners and renters experiencing financial losses due to the virus can now apply for emergency financial assistance through the U.S. Small Business Administration's (SBA) Disaster Assistance Loans.
"In anticipation of our City’s measured steps to contain the spread of COVID-19, our staff worked closely with county and state administrators, as well as our elected officials, to secure this resource for our community," said City Manager Spencer Cronk. "We are excited that local small businesses and non-profits have another source of relief from the economic impacts of this pandemic, and we are continuing to evaluate other sources of support to respond to the needs of our local businesses and their employees."
According to the SBA, the Disaster Assistance Loan Program provides loans up to $2 million for small businesses and private nonprofits, at rates of 3.75% (for-profit) and 2.75% (nonprofit) for terms up to 30 years on a case-by-case basis.
Briseño said the potential local Economic Injury Disaster Program would observe those same interest rates but for a shorter term. She said businesses who are granted an SBA Disaster Assistance Loan typically have to wait four to five weeks to receive funds, so the local program would exist to help businesses in that gap.
The City said should the Economic Injury Disaster Loan Program move forward, the application process would be similar to that of the SBA Disaster Assistance Loans.
While the SBA mentions that homeowners and renters facing financial losses may apply for Disaster Assistance Loans, Briseño said the Economic Injury Disaster Program would be focused on helping small businesses. However, she said the City's housing department is also actively engaged in these economic conversations and she believes the community will soon see proposed solutions in that area as well.
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