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SBA Enhances Economic Injury Disaster Loan Program with Higher Borrowing Limit

The Small Business Administration (SBA) announced enhancements to its Economic Injury Disaster Loan Program (EIDL) to further help businesses impacted by the COVID-19 pandemic.
Small business owner taking advantages of the economic injury disaster loan program
  • The Small Business Administration raises COVID-19 EIDL Program cap to $2 million.
  • Deferred payment period implemented, allowing borrowers 24 months from loan disbursement. to begin paying funds back.
  • Expands eligible use of funds.

The U.S. Small Business Administration (SBA) announced Sept. 8, 2021 several changes to the Economic Injury Disaster Loan (EIDL) program, a disaster relief loan aimed at helping businesses hit hardest during the COVID-19 pandemic.

The SBA is accepting new applications from eligible entities, including small businesses (generally, those with 500 or fewer employees), nonprofits and agricultural businesses. The deadline to apply is Dec. 31, 2021, and the SBA encourages those interested to get more information about eligibility and the application process. 

Which businesses are eligible for the EIDL program?

Eligible businesses must be located in a federally declared disaster area and be able to prove economic injury that’s resulted in a shortfall in revenue. Certain types of entities, including religious institutions and businesses in the cannabis industry, are exempt from the program.

How much can businesses borrow as part of the program?

As part of the expanded program, a new 30-day exclusivity period has been established. The SBA will approve and disburse loans of $500,000 or less during this window, while loans of $500,000 or more will be approved and disbursed beginning Oct. 8, 2021.

The SBA is now offering up to $2 million in assistance to eligible businesses, an increase from the original $500,000 limit. Businesses that previously applied for an EIDL can reapply up to the amount they are qualified for or the new $2 million cap, whichever is lower.

The loans may be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid because of COVID-19’s impact. Additionally, one of the enhancements to the program is an expansion of what funds can be used to cover. EIDL funds are eligible to prepay commercial debt and pay federal business debt.

The SBA is offering loans with long-term repayments to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay. As of Sept. 9, a deferment period for any EIDL loan was established. EIDL borrowers now have 24 months after loan disbursement before the start of their repayment begins. For businesses that borrowed in 2020 and 2021 before the deferment period was established, your 24-month period will be set based on your original loan disbursement date.

What is the interest rate on loans under the EIDL program?

The interest rate on this loan is 3.75% for businesses without credit available elsewhere. The interest rate for non-profits is 2.75%.

How do you apply for the EIDL program?

The SBA application process includes:

  1. Registering and applying online at: https://disasterloanassistance.sba.gov/ela/s/
  2. Loan status can be checked at the same site where you registered. The turnaround time is generally less than four weeks, but this could vary based on expected high volume.

As part of the application, businesses are also required to submit IRS Form 4506, which will allow the SBA to access their tax returns. The SBA will also check the business’s credit, but it’s important to note that they aren’t looking for a spotless record. Instead, they’re looking for assurance that the business can afford to pay off the loan. The minimum credit score required to borrow up to $500,000 is 570, while a score of 625 is required for loan requests from $500,000.01 to $2 million.

If you experience any service issues, you can reach the SBA disaster assistance customer service center at: 1-800-659-2955 or via email: disastercustomerservice@sba.gov.

Other small business funding options may be available

Capital is always critical to small businesses, but it might be more important now than ever before. Additional avenues for financial help may be available for your business, depending on your circumstances. Consider financial support via options such as a bank or credit union, family and friends, or elsewhere.

For more information about developments with the coronavirus and how it could impact you, your employees, and your business, visit our dedicated Coronavirus Help Center.

This article originally was published on March 23, 2020.

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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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