California has been suffering from significant water shortages for at least the last five years, putting the state in a prolonged period of drought. Although El Niño has periodically increased the rainfall, California would still need to see two and a half to three times its average rainfall in order to even start ending the drought. According to reports, at least 40 percent of water consumption is used for agriculture in California. So, what can those small business owners do when the drought affects their bottom line?
Economic Injury Disaster Loans Available for Los Angeles Businesses
Los Angeles victims of drought from January 1, 2016, and continuing, who have suffered economic injury as a result of that drought, may be eligible for Economic Injury Disaster Loans. Businesses located in most California counties, including Los Angeles County, may be eligible for Disaster Loan Assistance. Applications are due by October 17, 2016.
How the Economic Injury Disaster Loans Work
Available assistance can include Economic Injury Disaster Loans, which provide working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster.
Specifics of the Economic Injury Disaster Loans
The term of the loan can be set at a maximum of 30 years. The Small Business Administration (SBA) will determine an appropriate installment payment based on the financial conditions of each borrower. That will then be the basis for determining the loan term. These loans cannot be used to refinance long-term debts.
Economic Injury Disaster Loans are Limited in Amount
The law limits Economic Injury Disaster Loans to $2,000,000 for the purpose of alleviating economic injuries caused by the disaster. The actual amount of each loan is limited to the economic injury determined by the Small Business Administration, less business interruption insurance, and other recoveries up to the administrative lending limit. The Small Business Administration also considers potential contributions that are available from the business and/or its owner(s) or affiliates. If, however, a business is a major source of employment, the Small Business Administration may be able to waive the $2,000,000 statutory limit. The interest rate for these loans is determined by formulas set by law up to 4 percent. The interest rate is fixed for the life of the loan.
Restrictions on Loan Eligibility
First, only nurseries are eligible for economic injury caused by declared drought disasters. Agricultural enterprises such as farmers and ranchers are not eligible for any type of SBA assistance. Loan assistance is available only to the extent the business and its owners cannot meet necessary financial obligations due to the disaster, a determination which is made by SBA.
Any businesses that apply for these loans must be located in the declared disaster area. The economic injury must have been the direct result of the declared disaster and only uninsured or otherwise uncompensated disaster losses are eligible. A business that has previously had an SBA loan, but did not comply with the terms of that loan, are not eligible.
For more information, contact SBA’s Disaster Assistance Customer Service Center by calling (800) 659-2955 or visiting SBA’s Web site at http://www.sba.gov/disaster.
Small Business Planning in California
When small business planning is done the right way, families can protect their assets from taxation while controlling how and when those assets are distributed. In doing so, you can provide a financial foundation for their loved ones that will remain stable long after you are gone. This type of advance planning is especially important for small and family-owned businesses in California. How your business is organized will have a substantial effect on how that business is taxed and administered after your death.
Business succession planning is important
Small business planning also involves succession planning, which means determining what will happen to your business upon your retirement, death, or disability. Despite the general desire that family business owners have to see their businesses passed on from generation to generation, many business owners do not have a succession plan in place. Without an appropriate plan, your family may be forced to sell the business or its assets after your death. As with all estate plans, there are many factors that must be considered to determine the options that are most beneficial to you, your business and your family.
If you have questions regarding small business planning, or any other estate planning needs, please contact the Schomer Law Group for a consultation, either online or by calling us at (310) 337-7696.
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