On September 9, 2021, the SBA announced that it was modifying the EIDL program to provide small businesses with enhanced financial aid through the SBA’s small business loan program. The modifications include increasing the maximum loan amounts, providing loan repayment deferrals, expanding the allowable use of loan proceeds, and simplifying rules of affiliation for borrowers. The following information summarizes the EIDL modifications:
- Maximum loan amount increased from $500,000 to $2 million. This change is effective September 8, 2021. Further, loan funds can be used to pay for operating expenses of the borrower and may also be used to provide working capital. Such operating expenses may include payroll costs, purchasing operating equipment, and payment of business debt.
- Payment deferment. The modifications include a payment deferment period of two years after the loan disbursement. Loan terms are generally up to 30 years for repayment. During the two- year payment deferment period, interest will continue to accrue. Thus, loan repayments may be made over the remaining 28 years. Interest rates for businesses are fixed at 3.75 percent.
- Expansion of use of loan proceeds. Loan proceeds can be used to pay back outstanding commercial loans along with any outstanding federal loans.
- Simplification of affiliate rules. Under the modified rules, an affiliate is a business that is controlled through common ownership of 50 percent or more of business equity. The SBA has long standing rules of affiliation that apply to loan eligibility and borrowing amounts, e.g., industry size standards based on number of employees and gross receipts.
- Thirty-day exclusivity period for smaller loans. From September 8, 2021 to October 8, 2021, there will be a 30-day window for smaller borrowers (loans equal to or less than $500,000) to apply for EIDL loans. Thus, applications for loans in excess of $500,000 will not be approved until after October 8, 2021.
- To apply for the EIDL loans, borrowers may apply through the SBA website at sba.gov/eidl. The EIDL program requires repayment, i.e., it is not forgivable as applicable to paycheck protection program loans. Further, collateral is required for EIDL loans greater than $25,000 and personal guaranties are required for loans greater than $200,000.