SBA Revises Economic Injury Disaster Loan Rules

On September 9th, 2021, the Small Business Administration (SBA) announced significant enhancements to its COVID Economic Injury Disaster Loan program. Generally, the Economic Injury Disaster Loan program (EIDL) assists businesses, renters, and homeowners located in regions affected by declared disasters. In March 2020, under the CARES Act, the SBA created the COVID-related version of the EIDL. Previously, the SBA extended the application due date for the COVID EIDL program.

Overview of the COVID Economic Injury Disaster Loan Program

As mentioned before, in March 2020, Congress signed into law the CARES Act (Act). By and large, the Act declared the COVID-19 outbreak a disaster under the Small Business Act, operated by the SBA. Therefore, the declaration allowed the SBA to create EIDLs for small businesses impacted by the pandemic. Chiefly, some requirements of the COVID Economic Injury Disaster Loan program include the following:

• Most small businesses are eligible to apply.
• The SBA does examine a business’s credit history and its ability to repay.
• Companies must show economic injury due to the coronavirus.
• EIDLs come directly from SBA Disaster Assistance.
• There is no cost to apply.
• Any provided funds are only for working capital (i.e., to pay fixed debts, payroll, accounts payable). The funding is not for lost sales, lost profits, or business expansion.

Changes to the COVID Economic Injury Disaster Loan Program

Following the SBA’s announcement, the agency released a list of the fundamental changes to the COVID EIDL program:

• Increasing the COVID EIDL Cap. Firstly, the SBA will lift the COVID EIDL cap from $500,000 to $2 million. Loan funds are available for everyday operating expenses and working capital, including payroll, purchasing equipment, and paying debt.
• Implementation of a Deferred Payment Period. Secondly, small business owners do not have to begin COVID EIDL repayment until two years after loan origination.
• Establishment of a 30-Day Exclusivity Window. Thirdly, the SBA will implement 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 those 30 days.
• Expansion of Eligible Use of Funds. Additionally, COVID EIDL funds are now eligible to prepay commercial debt and make payments on federal business debt.
• Simplification of Affiliation Requirements. Lastly, the SBA has established more simplified affiliation requirements to ease the COVID EIDL application process for small businesses.

 Employer Takeaways

In conclusion, eligible small businesses, nonprofits, and agricultural businesses in all U.S. states and territories can apply. Accordingly, interested parties can visit http://www.sba.gov/eidl20 to learn more about eligibility and application requirements. Most importantly, the last day that applications may be received is December 31st, 2021. On account of that, employers should get their applications in as soon as possible.