The United States Small Business Administration (SBA) announced major changes to COVID-19 Economic Disaster Loan 2020 (EIDL) on September 8, 2021, including increasing the maximum amount of loans available from $ 500,000 to $ 2 million.
The changes aim to make it easier for small businesses such as restaurants, gyms and hotels to access the more than $ 150 billion available for loans. The COVID-19 EIDL program, which will be in place until the end of 2021, and offers 30-year loans with fixed interest rates of 3.75% for small businesses, including sole proprietorships and independent contractors, and 2.75% for non-profit.
The now asleep Restaurant Revitalization Fund (RRF), which appropriated $ 28.6 billion in April 2021 to provide grants to the restaurant industry, was mentioned in the SBA announcement. RRF funding was quickly depleted after the RRF program received more than 278,000 requests for aid worth more than $ 72 billion, leaving more than 177,000 businesses without assistance, which the SBA cited as evidence of the need. funding for businesses in an economy still struggling with COVID-19.
The changes to the EIDL COVID-19 program are effective immediately and include those listed below. The new EIDL program:
- Increase the maximum COVID-19 EIDL loan from $ 500,000 to $ 2 million.
- Proceeds from the permit loan will be used for normal operating expenses and working capital, including payroll, equipment purchases and payment of commercial debt incurred before and after submission of the loan application. of a borrower, and the payment of federal commercial debt.
- Implement an extended deferred payment period for the first two years after loan disbursement, rather than the initial 18-month deferral period of EIDL. Interest will accrue during the deferral period and principal and interest payments must be made for the remaining 28 years.
- Establish a 30-day exclusivity window to ensure that “Main Street” businesses have more time to access EIDL funds. There will be a 30 day exclusivity period for the approval and disbursement of loans of $ 500,000 or less. Approval and disbursement of loans over $ 500,000 will begin after the expiration of this 30 day period.
- Simplify the membership conditions. The EIDL COVID-19 application process for small businesses adopts the $ 28.6 billion RRF membership requirements. An affiliated or affiliated enterprise is “an enterprise in which an eligible entity has a participation or a right to profit distributions of at least 50%, or in which an eligible entity has the contractual authority to control the management of the company. company, provided that such affiliation [is] determined on the basis of any arrangement or agreement existing on January 31, 2020. “
- Extend COVID-19 EIDL eligibility from organizations with no more than 500 employees to companies in hardest-hit industries that have 500 or fewer employees by physical location, provided the company, along with its subsidiaries, has no more than 20 locations.
Time will tell if these EIDLs fund the companies that need them most.