September 23, 2021                                                                              

The Small Business Administration (SBA) has increased the limit for COVID-19 Economic Injury Disaster Loans (EIDL) from $500,000 to $2 million.

In a recent announcement, the SBA has implemented some major changes to the existing EIDL to make it easier for the small business communities still reeling from the pandemic. Following are the key changes announced, which are all effective immediately:

• Loan maximum changed from $500,000 to $2 million: Loan proceeds can be used for any normal operating expenses and working capital, including meeting payroll, purchasing equipment and paying debt. EIDL funds are now also eligible to prepay commercial debt and make payments on federal business debt. SBA will begin approving loans greater than $500,000 on October 8.
• New deferred payment period: Recipients of the EIDL will not have to begin making repayments until two years from the date of first disbursement of your original COVID EIDL loan. Interest on your loan will accrue for the first two years, and payments of principal and interest will be made over the remaining 28 years. There is no penalty for prepayment.
• 30-day exclusivity window:To ensure small businesses have additional time to access these funds, the SBA has implemented a 30-day exclusivity window from September 8 to October 8 to approve and disburse funds for loans of $500,000 or less. Approval and disbursement of loans more than $500,000 will begin on October 8.
• Simplification of affiliation requirements: To make the EIDL application process easier, the SBA established more simplified affiliation requirements. Now, an affiliate is a business that you control or in which you have 50% of more ownership.

The improvements to the COVID EIDL program aim to give businesses more flexible support from the over $150 billion in available COVID EIDL funds. Here are some frequently asked questions to help you consider this opportunity for your business:

Who is eligible for an EIDL?
Applicants must be physically located in the U.S. and must have suffered working capital losses due to the COVID-19 pandemic. The COVID EIDL application contains specific eligibility screening questions and based on number of employees. Click here to access a sample application.

I’ve already applied and received a COVID EIDL – can I apply for an increase?
Yes. Even if you have applied and received a COVID EIDL already, you can apply for an increased loan. To apply for a loan increase, complete your request for an increase in your COVID EIDL portal.

How much can I borrow?
For loans up to $500,000, your maximum eligible loan amount is determined by a formula based on the date you began operations. You will have the opportunity to choose your loan amount, which must be equal to or less than the maximum eligible loan amount calculated by SBA.

• If you were in operation before January 1, 2019, your maximum eligible loan amount is calculated as follows: 2019 gross receipts or sales minus 2019 costs of goods sold multiplied by 2; OR $500,000 - whichever is less.
• For applicants that began operations partially through 2019 or 2020, SBA will calculate your maximum eligible loan amount.
• For applicants using rental loss, SBA will calculate your maximum eligible loan amount.
• For loans greater than $500,000, SBA will underwrite your loan. As part of its underwriting, SBA will perform a cash flow analysis for your business to confirm your business’s ability to repay the proposed COVID EIDL loan as well as your business’s existing debt obligations.

When is the deadline to file an application?
The last day that applications may be approved is December 31, 2021. Be sure to file your application as soon as possible to allow processing time for approval.

What can I use the loan proceeds for?
Loan proceeds can be used as working capital to make regular payments for operating expenses, including payroll, rent/mortgage, utilities, and other ordinary business expenses, and to pay business debt incurred at any time (past present or future).

What are the loan terms?
The COVID EIDL is a loan that must be repaid. Unlike the Paycheck Protection Program, a COVID EIDL loan is not forgivable.

Interest Rate and Term:

• Businesses: 3.75% fixed for 30 years
• Private nonprofit organizations: 2.75% fixed for 30 years

Payment Deferral:

• Payments are deferred for 24 months (during which interest will accrue) from the date of first disbursement of your original COVID EIDL loan.
• Monthly payments of principal and interest will begin at the end of the deferment period and will be paid over the remaining 28 years.
• You may make prepayments at any time without penalty.

Collateral is required for loans greater than $25,000 and a personal guaranty is required for loans greater than $200,000.

Eligible small businesses, nonprofits, and agricultural businesses in all U.S. states and territories can apply for the EIDL program. If you’d like to discuss your EIDL options, eligibility status or application, please call us today.

For more information about eligibility and application requirements, visit www.sba.gov/eidl.