Economic Injury Disaster Loans (EIDL) just got a boost. Starting the week of April 6, the Small Business Administration (SBA), which oversees the loan program, is improving the terms for the Covid-19 EIDL program from covering six months of economic distress up to maximum loan of $150,000 to 24 months and up to a maximum loan of $500,000.
“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,” said SBA Administrator Isabella Casillas Guzman in a press release.
What This Means for New and Existing EIDL Loans
As of Feb. 15, more than 3.7 million Covid EIDL loans had been approved totaling over $200 billion in approved funds.
According to the SBA, some loans approved prior to the week of April 6 will be eligible for an increase based on the revised loan maximum amounts. Businesses that received a loan subject to the current loan limit do not need to submit a request for an increase. The SBA says it will reach out directly to applicants.
Any new loan applications and any loans in process when the new loan limits begin will automatically be considered for loans covering 24 months of business loss for up to a maximum of $500,000.
The increased relief comes just 12 days after the SBA released additional guidance that the agency would extend deferment periods for all disaster loans–not just Covid EIDLs–until 2022 to allow more time for any affected businesses to recover. The first payment due date for disaster loans made in 2020 is 24 months after loan approval; the first payment for all loans made in 2021 is 18 months after approval.
Is An EIDL Loan Right For Me?
EIDL loans resemble Paycheck Protection Program (PPP) loans in that both provide funds for industries struggling to stay solvent in the wake of the coronavirus or, in the case of EIDL loans in general, any other qualifying disaster. An EIDL loan can be used to cover payroll and inventory, pay debt or any other business-related expenses.
But unlike PPP loans, which can be all or partially forgiven if certain use criteria is fully or partially met, EIDL loans have to be paid back. Any EIDL loans for more than $25,000 also have a collateral requirement, which can be any qualifying asset including machinery, other equipment, furniture and fixtures.
The interest rate once the deferment period ends on an EIDL loan is a fixed 3.75% for businesses or a fixed 2.75% for nonprofits. Borrowers have 30 years to repay their loan, and there are no prepayment penalties or fees. These are generally far more favorable terms than other types of loans, like a small business loan from a bank or other lending institution.
Be aware that an EIDL Loan is not the same as an EIDL Advance Loan, which originally offered forgivable grants of up to $10,000 for qualified applicants for $1,000 per employee, up to a maximum of 10 employees and $10,000. That program ended in July 2020 when the allotted funds were fully allocated.
On Dec. 27, a new iteration was created called the COVID-19 Targeted EIDL Advance as part of the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act. This version aims to provide small businesses in low-income communities with up to $10,000 in additional funds. Funds are available to applicants in low-income areas who previously received an EIDL Advance for less than $10,000, or those who applied but didn’t receive funds due to a lack of available program funding.
Source: https://mooresvilletribune.com/business/investment/personal-finance/covid-19-small-business-loans-are-about-to-get-much-bigger/article_c5a40e35-a67e-5beb-84bb-a1b06440e340.html