On September 9, 2021, the Small Business Administration (SBA) announced major modifications to the COVID-19 Economic Injury Disaster Loans (EIDL) program, including raising the loan cap from $500,000 to $2 million and adding business debt payments to the list of ways businesses can use the loan proceeds.
A new regulation was added limiting entities that are part of a single corporate group to receive a combined total of no more than $10 million in COVID-19 EIDL loans. For purposes of this limit, entities are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent.
The following key changes were announced. All are effective immediately:
- Increasing the COVID-19 EIDL cap from $500,000 to $2 million: Loan funds can be used for any normal operating expenses and working capital, including payroll, rent/mortgage, utilities, purchasing equipment, and paying debt incurred at any time (past, present and future).
- Implementation of a deferred payment period: The SBA will ensure small business owners will not have to begin COVID-19 EIDL repayments until two years after loan origination. 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 had implemented an 18-month deferment period for loans made during 2021.
- Establishment of a 30-day exclusivity window: To ensure Main Street businesses have additional time to access these funds, the SBA said it is implementing a 30-day exclusivity window of approving and disbursing funds for loans of $500,000 or less. Approval and disbursement of loans over $500,000 will begin after the 30-day period.
- Expansion of eligible use of funds. COVID EIDL funds will now be eligible to prepay commercial debt and make payments on federal business debt.
- Simplification of affiliation requirements: To ease the COVID-19 EIDL application process for small businesses, the SBA established more simplified affiliation requirements to mimic those of the $28.6 billion Restaurant Revitalization Fund.
- The COVID-19 EIDL 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 not-for-profits.
- Collateral is required for all loans greater than $25,000.
- Loans over $200,000 will require a personal guaranty.
If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford), or email us at info@cironefriedberg.com.
