On Wednesday, the U.S. Small Business Administration (SBA) published an interim final rule which took immediate effect. The SBA is expanding access to its Economic Injury Disaster Loan (EIDL) program, low-interest loans for businesses and nonprofits damaged by the pandemic, to certain businesses–like restaurants with up to 20 locations, provided each location has no more than 500 employees. With more than $100 billion left in lending authority, and other aid programs out of commission, the agency expects demand for EIDLs to surge.
The COVID Economic Injury Disaster Loan (EIDL) program, which runs through Dec. 31 or until funds run out, 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.
Key changes being announced by the SBA include:
- Increasing the COVID EIDL Cap. The SBA will lift the COVID EIDL cap from $500,000 to $2 million. Loan funds can be used for any normal operating expenses and working capital, including payroll, purchasing equipment, and paying debt.
- Implementation of a Deferred Payment Period. The SBA will ensure small business owners will not have to begin COVID EIDL repayment until two years after loan origination so that they can get through the pandemic without having to worry about making ends meet.
- Establishment of a 30-Day Exclusivity Window. To ensure Main Street businesses have additional time to access these funds, 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 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 EIDL application process for small businesses, the SBA has established more simplified affiliation requirements to model those of the Restaurant Revitalization Fund.