Earlier this month, the Small Business Administration (“SBA”) announced changes to its COVID Economic Injury Disaster Loan Program (“COVID EIDL”). The changes are intended to increase availability of, and access to, funding for small businesses that suffered working capital losses due to the coronavirus pandemic. The changes include:
- Increased loan cap from $500,000 to $2 million; with a $10 million aggregate cap for any group of companies owned, directly or indirectly, by a common parent;
- A payment deferment period of 24 months from loan origination;
- Expansion of permitted loan uses to include payment and pre-payment of commercial and federal debt;
- Simplification of “affiliate” definition to any business that the applicant controls or in which the applicant has a 50% or greater ownership interest; and
- Simplification of application process to a model aligned with the process for the Restaurant Revitalization Fund.
These changes apply to new COVID EIDL applicants and to applicants that already received COVID EIDL funds. Businesses that already received COVID EIDL funds may apply for increases under the new rules. It appears that the SBA will apply the 24-month deferment period to all existing COVID EIDL loans automatically. It is not clear whether the new, expanded permitted uses apply to the use of existing loans.
The SBA currently is accepting and approving applications for new loans of $500,000 or less, and is accepting and approving applications to increase existing loans to $500,000 or less. Applications for loans greater than $500,000, or to increase existing loans to greater than $500,000, may be accepted but will not be approved before October 8, 2021. New applicants may submit an intake form here. Those with an existing COVID EIDL account can log into that account on the SBA Portal and apply for an increase.
These loans continue to have 30-year terms, a 3.75% interest rate, collateral requirements for loans in excess of $25,000, and guaranty requirements for loans in excess of $200,000.
For further assistance please contact your primary GEABP attorney.