SBA ups EIDL loan maximum to $2M

The Small Business Administration is increasing the cap for COVID Economic Injury Disaster Loans from $500,000 to $2 million.

Small businesses that have been hit by the pandemic will be able to apply for the increased loans immediately, the SBA said Thursday. The program is especially targeting hard-hit sectors of the economy such as restaurants, gyms and hotels that are still having trouble attracting the number of customers they served before the pandemic.

The highly transmissible Delta variant of COVID-19 has added fresh concerns for the economy, and the SBA hopes to offer ways to aid businesses that are still struggling to survive. The expiration of the SBA’s Paycheck Protection Program at the end of May and of the Employee Retention Credit at the end of the year leave the EIDL program as one of the best options for small businesses right now, although like the ERC, it too expires on Dec. 31, 2021 unless it’s extended by Congress. Many businesses had trouble getting the loans last year early in the pandemic, and the program was taken advantage of by fraudsters. But new changes, including a streamlined review process and the ability to defer payments and prepay business debt, may make the EIDL program more attractive to small businesses and their accountants now.

“The SBA’s COVID Economic Injury Disaster Loan program offers a lifeline to millions of small businesses who are still being impacted by the pandemic,” SBA Administrator Isabella Casillas Guzman said in a statement. “We’ve retooled this critical program — increasing the borrowing limit to $2 million, offering 24 months of deferment, and expanding flexibility to allow borrowers to pay down higher-interest business debt. We have also ramped up our outreach efforts to ensure we’re connecting with our smallest businesses as well as those from low-income communities who may also be eligible for the companion COVID EIDL Targeted Advance and Supplemental Advance grants totaling up to $15,000.”

The SBA is lifting the COVID EIDL cap from $500,000 to $2 million. The loan funds can be used for any normal operating expenses and working capital, including payroll, purchasing equipment, and paying debt.

The SBA also plans to make sure small business owners won’t need to begin COVID EIDL repayment until two years after loan origination so that they can get through the pandemic without having to worry about making ends meet.

To give Main Street businesses more time to access the funds, the SBA will offer a 30-day exclusivity window of approving and disbursing funds for loans of $500,000 or less. Approval and disbursement of loans over $500,000 will start after the 30-day period.

COVID EIDL funds will now be eligible to prepay commercial debt and make payments on federal business debt. To simplify the COVID EIDL application process for small businesses, the SBA has set up easier affiliation requirements modeled after the Restaurant Revitalization Fund.

Senate Small Business Committee chair Ben Cardin, D-Maryland, praised the changes in the program. “I am grateful that the Biden Administration continues to implement changes to make EIDL more useful to American small businesses,” Cardin said in a statement Thursday. “Dollar for dollar, EIDL is one of the best investments the federal government can make in our nation’s small businesses. This increase will give small businesses access long-term, affordable loans to keep their doors open during the pandemic and prepare for the future.”

The improvements to the COVID EIDL program aim to give businesses more flexible support from the over $150 billion in available COVID EIDL funds. The changes will help entrepreneurs access capital at a time when, according to a recent Goldman Sachs 10,000 Small Businesses survey, 44% of small business owners report having less than three months of cash reserves, and only 31% report confidence in gaining access to funding.

Eligible small businesses, nonprofits, and agricultural businesses in all U.S. states and territories are able to apply for the EIDL program. For more information about eligibility and application requirements, visit www.sba.gov/eidl. The last day that applications may be received is Dec. 31, 2021. For more information on COVID EIDL and other recovery programs, visit www.sba.gov/relief.