SBA Announces COVID-19 EIDL Modifications, Raises Loan Cap to $2 Million

September 10, 2021

The U.S. Small Business Administration (SBA) recently announced modifications to the COVID-19 Economic Injury Disaster Loans (EIDL) program to make it easier for small businesses affected by the pandemic to access the more than $150 billion in funding available for loans.

The SBA has raised the loan cap from $500,000 to $2 million, and recipients will not have to begin repayments until two years after loan origination. Payments of principal and interest will be made over the remaining 28 years.

The SBA will be implementing a 30-day 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 days. To ease the application process for small businesses, the SBA has formed more simplified affiliation requirements similar to those of the Restaurant Revitalization Fund.

The SBA also published an interim final rule (IFR) detailing many of the program changes. The IFR expands eligibility from organizations with no more than 500 employees to organizations in the hardest-hit industries that have 500 or fewer employees per physical location, provided the business, together with its affiliates, has no more than 20 locations.

The IFR also allows recipients to use loan proceeds to make debt payments including monthly installments, deferred interest and pre-payment on business debt. Except for pre-payments, these payments are now permitted on loans from federal agencies, including the SBA, and licensed Small Business Investment Companies (SBICs). Recipients may use loan proceeds to pay debt incurred both before and after submitting their application.

Additionally, the SBA added a regulation limiting entities that are part of a single corporate group to receive a combined total of no more than $10 million. Entities are defined as part of a single corporate group if they are directly or indirectly majority-owned by a common parent.

The COVID-19 EIDL program runs through Dec. 31, 2021. The program offers 30-year loans with fixed interest rates of 3.75 percent for small businesses, sole proprietors and independent contractors and 2.75 percent for not-for-profits.