The U.S. Small Business Administration (“SBA”) has announced new enhancements to the COVID Economic Injury Disaster Loan (“EIDL”) program, a federal disaster relief loan designed to better serve and support small businesses still reeling from the pandemic, especially hard-hit sectors such as restaurants, gyms, and hotels. The COVID EIDL program, which runs through December 31, 2021 offers 30-year loans with fixed interest rates of 3.75% for small businesses, including sole proprietors and independent contractors, and 2.75% for not-for-profits.
The new enhancements to the EDIL program include:
- Increasing the COVID EIDL Cap: The SBA will lift the COVID EIDL cap from $500,000 to $2 million. Loan funds can be used for any normal operating expenses and working capital, including payroll, purchasing equipment, and paying debt.
- Implementation of a Deferred Payment Period: The SBA will ensure small business owners will not have 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.
- Establishment of a 30-Day Exclusivity Window: To ensure small businesses have additional time to access these funds, the SBA will implement 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 begin after the 30-day period.
- Expansion of Eligible Use of Funds: COVID EIDL funds will now be eligible to prepay commercial debt and make payments on federal business debt. Previously, the funds could be used only for working capital needed to sustain the business until it could resume normal operations.
- Simplification of Affiliation Requirements: To ease the COVID EIDL application process for small businesses, the SBA has established more simplified affiliation requirements to model those of the Restaurant Revitalization Fund. The SBA expanded COVID EIDL eligibility to businesses that have 500 or fewer employees per physical location, provided the business, together with its affiliates, has no more than 20 locations.
We will issue additional Alerts as further guidance becomes available. Your LMC professional is available if you have questions related to the latest updates on this topic.