This week, the U.S. Small Business Administration (SBA) announced that it increased the maximum amount a small business or non-profit organization can borrow through the Economic Injury Disaster Loan (EIDL) program. As noted back in January, the EIDL program is a lending program under the CARES Act that offers working capital loans to small businesses and non-profit organizations to help them meet financial obligations and operating expenses they now cannot meet because of a disaster … of which the COVID-19 pandemic is classified as one.
SBA Adapts EIDL as Needs Continue
When the program first came out, the loan limit was set at $150,000 for qualifying businesses that could prove they had an economic injury to their business of at least 6 months. Because the pandemic is lasting longer than expected, the SBA more than tripled the loan amount to a maximum of $500,000 and quadrupled the economic injury period to 24 months.
Businesses having received a loan under the old guidelines, and qualifying for an increase under the new guidelines, will be (or have been already) contacted by the SBA by email on the procedures to request more money under the new guidelines. Qualifying businesses needing working capital to save their business from going under, but that have not yet applied for an EIDL loan, should do so using the new guidelines.
Also, in a March 12th EIDL announcement from the SBA, they extended the loan payback period to give businesses more time to build back their businesses and be better able financially to pay back their loans. Under the new guidelines, for loans made in 2020, the first loan payment is due 24 months from the loan date; for loans made in 2021, the first due date is 18 months from the loan date.
In regard to the EIDL changes, the SBA Administrator Isabella Casillas Guzman said, “More than 3.7 million businesses employing more than 20 million people have found financial relief through SBA’s Economic Injury Disaster Loans, which provide low-interest emergency working capital to help save their businesses. However, the pandemic has lasted longer than expected, and they need larger loans. Many have called on SBA to remove the $150,000 cap. We are here to help our small businesses and that is why I’m proud to more than triple the amount of funding they can access.”
What Can EIDL Be Used For?
EIDLs can be used to pay normal operating expenses like rent, utilities, debt payments or continuation of health-care benefits to their employees. The loans are made at a fixed rate of 3.75% for businesses (2.75% for nonprofits) and are payable back over the course of 30 years. Since the pandemic started, a total of $195 billion through the CARES Act had been approved up through November 2021.