Substantial economic injury refers to significant financial harm experienced by a small business that prevents it from fulfilling its financial obligations, covering its essential operating expenses, or continuing to provide its usual products or services. This type of injury does not include losses from anticipated profits or declines in sales.
This term is primarily used in the context of disaster relief and economic assistance programs, particularly those administered by the Small Business Administration (SBA). It is relevant in legal practices involving business financing, disaster recovery, and economic support for small businesses. Users can find legal forms and templates related to disaster loans and economic injury claims through resources like US Legal Forms.
Here are a couple of examples of abatement:
Example 1: A small restaurant suffers a significant drop in customers due to a natural disaster, making it impossible to pay its rent and supplier bills. This situation qualifies as substantial economic injury.
Example 2: A local manufacturer faces a temporary shutdown due to a supply chain disruption caused by a recent flood, resulting in an inability to cover payroll and operational costs. (hypothetical example)
Substantial economic injury is defined under 13 CFR 123.500, which governs the SBA's Military Reservist Economic Injury Disaster Loans. This regulation outlines the criteria for determining economic injury for small businesses affected by disasters.
| Term | Definition | Key Differences |
|---|---|---|
| Economic Injury | General financial harm affecting a business. | Substantial economic injury specifically refers to the inability to meet financial obligations, while economic injury may not meet this threshold. |
| Loss of Profits | Reduction in expected earnings. | Loss of profits is not considered substantial economic injury, as it does not affect the ability to meet obligations or operational expenses. |
If you believe your business has experienced substantial economic injury, consider the following steps:
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| Attribute | Details |
|---|---|
| Definition | Significant financial harm preventing business operations. |
| Legal Reference | 13 CFR 123.500 |
| Exclusions | Loss of anticipated profits or sales declines. |
It includes the inability to meet financial obligations, pay operating expenses, or continue providing products/services.