SBA Increases Amounts for COVID-19 Economic Injury Disaster Loans

The Small Business Administration (SBA) announced on September 8, 2021, that they are significantly increasing the amount of Economic Injury Disaster Loans (EIDL) that one can obtain as we continue to work our way through the Covid-19 economic crisis. Since the last update in March 2021, when the program changed the maximum loan amount from $150,000 to $500,000, the maximum has now been raised to $2 million. The same terms still apply to existing EIDL balances and repayment is still deferred to 2022. For all SBA disaster loans made in 2020, the first payment due date is 24 months, extended from 12 months, from the loan origination note date. For those made in 2021, the first payment due date is 18 months, extended from 12 months, from the date of the note.

SC&H Key Takeaways 

  • Maximum loan amounts have moved from $500,000 to $2 million
  • Loan structure is the same as before—30-year term, 2.75-3.75% interest rate, no pre-payment penalties, no personal guarantees unless the loan balance exceeds $200,000
  • Usage of EIDL funds can be for 6 months of working capital, normal operating expenses, and items such as fixed debt payments, utilities, employee benefits, etc. 
  • Collateral is required for loans over $25,000generally only the personal property of the borrower 
  • EIDL funds can be used to pay and prepay commercial debts and make payments on federal business debt
  • These loans, unlike other forms of relief in place, are not forgivable

Until October 8th, the SBA has created an exclusive window where they will only focus on approving loans of $500,000 or less. After that window passes, all loan sizes will be considered.

As before, EIDL proceeds cannot be used for the same purpose as a Paycheck Protection Program (PPP) loan. If you have received a previous loan through PPP, the Restaurant Revitalization Fund (RRF), or the Shuttered Venue Grant (SVOG) you can still benefit from EIDL. The loan amount is limited to six months of working capital up to the new maximum of $2 million. Borrowers need to meet the small business standards in place for these loans.

EIDL Loan Criteria

  • Less than 500 employees
  • Most nonprofits are qualified
  • Sole proprietorships and independent contractors also qualify
  • Certain industries such as lending, investment, and gambling are not allowed to participate

Uses Allowed Under EIDL

  • Pay or pre-pay business non-federal debt incurred at any time (past or future), this includes monthly payments and/or payments of deferred interest
  • Regularly scheduled payments on federal debt
  • Payroll
  • Rent or mortgage
  • Utilities

Uses Not Allowed Under EIDL

  • Expanding your business
  • Start a new business
  • Making prepayments on debt owned by a federal agency or an SBIC

The interest charged will be a 2.75% fixed rate for nonprofit organizations and 3.75% for all other businesses. The application is completed directly with the SBA. 

To learn more about the details, FAQs, and other data available, visit the Covid-19 EIDL page on the SBA website. 

If you have any questions about EIDL or any other Covid-19 relief programs, please do reach out to our Tax Team. As more relief provisions are rolled out by Congress and the states, keep our Coronavirus Resource Center bookmarked for the latest and most timely information