SBA Quadruple EIDL COVID-19 Limit to $ 2 Million

The US Small Business Administration (SBA) announced major changes to the COVID-19 Economic Disaster Lending (EIDL) program, including increasing the loan limit from $ 500,000 to $ 2 million and adding payments from commercial debt to the list of ways in which businesses can use the loan proceeds.

In a press release issued Thursday afternoon, the SBA said it was implementing the changes to enable small businesses still reeling from the pandemic, especially hard-hit sectors such as restaurants, gyms and hotels, to access the more than $ 150 billion in financing available for loans.

The following key changes have been announced. All come into effect immediately:

  • Increased COVID-19 EIDL cap from $ 500,000 to $ 2 million: The loan proceeds can be used for all normal operating expenses and working capital, including payroll, equipment purchase, and debt payment. COVID-19 EIDL funds are now also eligible to prepay commercial debt and make payments on federal commercial debt.
  • Establishment of a deferred payment period: The SBA has said small business owners won’t have to start COVID-19 EIDL repayments until two years after the loan is issued. Payments are deferred for the first two years (during which interest will accrue), and payments of principal and interest are made over the remaining 28 years. The agency previously implemented an 18-month deferral period for loans made in 2021.
  • Establishment of a 30-day exclusivity window: To ensure Main Street businesses have more time to access these funds, the SBA has said it is implementing a 30-day exclusivity window to approve and disburse funds for loans of $ 500,000. or less. Approval and disbursement of loans over $ 500,000 will begin after the 30 day period.
  • Simplification of membership conditions: To make the COVID-19 EIDL application process easier for small businesses, the SBA established more streamlined membership requirements to mimic those of the $ 28.6 billion Restaurant Revitalization Fund.

The EIDL COVID-19 program, which runs through December 31, offers 30-year loans with fixed interest rates of 3.75% for small businesses, including sole proprietors and independent contractors, and 2.75% for non-profit organizations.

The SBA referred to the RRF in a provisional final rule (IFR) released on Wednesday which provides details of many changes to the COVID-19 EIDL program. The IFR notes that although the RRF was earmarked at $ 28.6 billion to provide grants to the restaurant industry, the program received 278,304 applications seeking more than $ 72 billion in aid, or almost three times the appropriate amount. Funding was quickly depleted, leaving 177,300 businesses without assistance – evidence, according to the SBA, of unmet business financing needs in an economy currently facing a surge in COVID-19 infections linked to the Delta variant of the virus .

The IFR also extends 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, with its subsidiaries, has no more than 20 locations.

The new rule allows EIDL COVID-19 beneficiaries to use the loan proceeds to make debt payments, including monthly installments, deferred interest, and prepayment on commercial debt. The same payments, with the exception of prepayments, are now allowed on loans from federal agencies (including the SBA) and licensed small business investment companies (SBICs).

Recipients of EIDL COVID-19 can use the loan proceeds to pay off debts incurred before and after submitting the loan application. Previously, funds could only be used for working capital needed to keep the business going until it could resume normal operations.

The SBA has added new regulations limiting entities that are part of a single business group to receive a combined total of no more than $ 10 million in COVID-19 EIDL loans. For the purposes of this limit, the entities are part of the same group of companies if they are majority owned, directly or indirectly, by a common parent company.

AICPA experts discuss the latest news on COVID-19 EIDL and other small business assistance programs at a virtual town hall held every two weeks. The webcasts, which offer CPE credits, are free for AICPA members and $ 39 for non-members. Go to AICPA Town Hall Series web page for more information and to register. City council recordings can be viewed free of charge on AICPA TV.

The AICPA Paycheck Protection Program (PPP) Resource Page houses resources and tools produced by the AICPA to help cope with the economic impact of the coronavirus.

For resources to support small businesses in the post-pandemic environment, visit AICPA & CIMA Small Business Resilience Resource Center.

For more information and stories on the coronavirus and how CPAs can handle the challenges of the outbreak, visit JofA‘s coronavirus resource page Where subscribe to our email alerts for the latest PPP news.

Jeff drew ([email protected]) is a JofA senior editor.

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