The U.S. Small Business Administration (SBA) has quadrupled the loan cap for COVID-19 Economic Injury Disaster Loans (EIDL) from $500,000 to $2 million and added business debt payments to the ways in which the loan proceeds can be used.

Why the Change?

The SBA said the changes were implemented to make it easier for small business communities that are still impacted by the pandemic, including restaurants, gyms, and hotels, to access the $150 billion of funding that is still available for recovery assistance. 

Key Changes

  • Increasing the COVID-19 EIDL cap from $500,000 to $2 million: Funds are now eligible to prepay commercial debt as well as making payments on federal business debt. Loan proceeds may also be used for normal operating expenses and working capital that can be used for meeting payroll, equipment purchasing, and debt payment. The loans can now be used to pay debt that was incurred before or after the loan application submission. 
  • Deferred payment period implementation: COVID-19 EIDL repayments are being deferred for two years after the loan origination date, although interest will accrue during this period of time. Payments of principal and interest are to be made within 28 years. 
  • 30-day exclusivity window has been established: The SBA stated that it is implementing a 30-day exclusivity period of approving and disbursing loan funds of $500,000 or less to ensure that Main Street businesses have the additional time needed to access them. Loans greater than $500,000 will begin the approval and disbursement process after the 30-day period.
  • Affiliation requirements simplification: The SBA established more simplified affiliation requirements to imitate those of the $28.6 billion Restaurant Revitalization Fund (RRF), easing the application process for small businesses.

Do I Qualify?

In order to take advantage of the COVID-19 Economic Injury Disaster Loan, all applicants must be physically located within the U.S or designated territory and have realized working capital losses caused by the COVID-19 pandemic. To qualify, applicants must fall under the following categories:

  • Small business per the SBA’s Size standards, typically 500 or fewer employees.
  • Cooperative with 500 or fewer employees
  • Agriculture enterprise with 500 or fewer employees
  • Faith-based organization
  • Sole proprietorship or independent contractor
  • Most private nonprofits

For-profit businesses are also required to meet the minimum credit score of 570 to be eligible for loans of $500,000 or less; or must meet the minimum credit score of 625 to qualify for loans greater than $500,000. For more information regarding eligibility, you can visit the SBA’s EIDL FAQ or speak with a Perlson representative at 516-541-0022.

Additional Changes

Running through December 31, the COVID-19 EIDL program offers 30-year loans with a fixed interest rate of 3.75% for small businesses, sole proprietors and independent contractors, and 2.75% for not-for-profits.

The recent changes expand eligibility from organizations with more than 500 employees to those with 500 or fewer per physical location, as long as the business with its affiliates have no more than 20 locations.

The SBA now allows entities that are majority-owned by a single corporate group to receive no more than $10 million combined.

If you have any questions pertaining to this or any other tax matter, we encourage you to reach out to a Perlson LLP professional. Please contact us at your convenience at 516-541-0022 to discuss how we can help you navigate your unique situation. 

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