SBA announces new 2021 EIDL rules, $2M max loan amount, 2Y deferment

On September 9, 2021, President Biden announced changes to the COVID EIDL (Emergency Injury Disaster Loan) program, including an increase of the maximum loan amount to $2 million, a streamlined loan review process, deferred payments for 2 years, and expanded eligible use of loan funds, including paying down higher-interest debt.

In addition, for the first 30 days following the announcement, the SBA will prioritize and the approval and disbursement of loans of $500,000 or less, in an effort to support smaller businesses. This is a similar approach to the administration’s previous “PPP exclusive application period” that restricted new PPP applications to businesses with fewer than 20 employees for an initial period after the PPP reopened.

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SBA Administrator Guzman emphasized additional efforts to help America’s truly small and under-served businesses with this new COVID EIDL plan. She said, “We have also ramped up our outreach efforts to ensure we’re connecting with our smallest businesses as well as those from low-income communities who may also be eligible for the companion COVID EIDL Targeted Advance and Supplemental Advance grants totaling up to $15,000.”

Let’s go over the new COVID EIDL updates and rule changes in a little more detail.

The COVID EIDL loan cap (maximum loan amount) is being increased to $2 million

Prior to this announcement, the maximum COVID EIDL loan amount was $500,000. Since the pandemic is continuing and there’s a resurgence of business impact due to the Delta variant, the SBA is raising the cap to $2 million.

The SBA has simplified the eligibility and affiliation requirements for COVID EIDL loans

In an effort to streamline the COVID EIDL application process and get small businesses the emergency funding they need, the SBA has established more simplified affiliation requirements similar to those of the Restaurant Revitalization Fund.

There’s a new 2-year COVID EIDL loan deferment period (interest accrues)

The new rules allow for a 2-year loan deferment from the date of loan origination, allowing struggling businesses more time to get financially stable before payments on the EIDL loan are required. Interest will accrue during the deferment period at the approved interest rate (see below).

COVID EIDL loan funds may now be use to prepay commercial and pay down federal business loans

The new 2021 EIDL rules are expanded to allow the approved use of funds to prepay higher-interest commercial debt, as well as pay down federal business debt. The previously approved uses of funds are still in effect (any normal operating expenses including payroll, buying equipment, improvements, paying debt, etc.).

For the first 30 days, the SBA will accept and process smaller EIDL loans only

In an effort to support truly small businesses, the SBA will only accept and process COVID EIDL loans for amounts of $500,000 or less. After this period, loans up to the the new $2 million cap will be accepted and processed.

What are the terms and rates of an SBA COVID EIDL loan?

For those small businesses looking for financial support through these difficult times, an EIDL loan may be a way for you to survive.

Here are some FAQs about the SBA’s COVID EIDL loan program.

What is the COVID EIDL loan?

A loan directly from the SBA that must be repaid. It is a low-interest, fixed-rate, long-term loan to help overcome the effects of the pandemic by providing working capital to meet operating expenses.

What is the COVID EIDL loan term and interest rate?

The loan term is 30 years. For businesses the interest rate is 3.75% fixed. For private nonprofit organizations, the rate is 2.75% fixed.

What are the rules for repayment and deferment for a COVID EIDL loan?

Payments are deferred for the first 2 years (however, interest will accrue), and payments of principal and interest are made over the remaining 28 years. There is no penalty for prepayment (paying off your loan early).

What are the approved uses of a COVID EIDL loan?

Loan proceeds are to be used as working capital to make regular payments for operating expenses, including payroll, rent/mortgage, utilities, and other ordinary business expenses, and to pay business debt incurred at any time (past present or future).

What are the loan fees for a COVID EIDL loan?

For loans $25,000 or less: There are no fees if applying directly through the SBA

For loans greater than $25,000: There is a one-time $100 fee for filing a lien on borrower’s business assets, plus costs to file lien on real estate when applicable

For loans greater than $500,000 where SBA is taking real estate as collateral: One-time $100 fee for filing a lien on borrower’s business assets. Additionally, the borrower will be responsible for recording the real estate lien and paying the associated fees

Is there collateral or personal guaranty required for a COVID EIDL loan?

Collateral is required for loans greater than $25,000. A personal guaranty is required for loans greater than $200,000.

How can I apply for a COVID EIDL loan?

You can apply directly via the SBA. You can complete your COVID EIDL application online as well as request an increase via your COVID EIDL portal.

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