SBA expands COVID Economic Injury Disaster Loan program

The U.S. Small Business Administration has made changes to its COVID Economic Injury Disaster Loan (EIDL) program that a local banking executive said many businesses will find advantageous. 

Recently, the SBA announced that it was enhancing the program by, among other things, raising the limit that could be borrowed from $500,000 to $2 million dollars. 

Kevin Brown, chief loan officer at First Commonwealth Federal Credit Union, said for many businesses the extra help is needed. 

“It will certainly help some of the businesses that have had lower revenues that $500,000 won’t cover,” he said. 

There are many changes aimed at helping small to medium-sized businesses, particularly those with under 500 employees. 

“Our mission-driven SBA team has been working around the clock to make the loan review process as user-friendly as possible to ensure every entrepreneur who needs help can get the capital they need to reopen, recover and rebuild,” said SBA Administrator Isabella Casillas Guzman. 

Other changes include increasing the period of time where a business doesn’t have to repay the loan. 

Currently, the loans, which are 30-year loans at 3.75% interest, have 18 months of deferred payments. 

Under the changes, businesses have two years before they need to start repaying the loan, which will help those businesses get the breathing room they may need as they try to recover from the pandemic’s impact. 

Brown said probably the biggest advantage to the changes in the EIDL program is that it expands the ways the loan money can be used. 

“We have one client member who used the loan to put a down payment on a building,” he said. 

Noting thatt EIDL is a direct SBA loan and does not go through banks and credit unions like the Paycheck Protection Program Loans, he said others he has talked to have used the funds to pay down their debt from other higher interest loans. 

“Especially for companies with a larger number of employees, this could really be a benefit. We’ve seen a lot of our business members take advantage of EIDL,” Brown said. 

Unlike the PPP loans, Brown noted that the EIDL loans are not forgiven and do need to be repaid over 28 years once the two-year deferment is up. 

Part of the EIDL program however, does provide for grant money for businesses in low-income areas. 

Targeted Advance and Supplemental Advance grants are available totaling up to $15,000. Those do not need to be repaid. 

To ensure that Main Street businesses have additional time to access EIDL funds, the SBA has implemented a 30-day exclusivity window for approving and disbursing funds for loans of $500,000 or less, that are part of the original allocation. 

The enhanced EIDL would then take effect starting in early October. 

The money certainly seems to be needed. 

Guzman noted that according to a recent Goldman Sachs 10,000 Small Businesses survey, 44 percent of small business owners report having less than three months of cash reserves and only 31 percent reporting confidence in gaining access to funding. 

The goal of the enhancements to the COVID EIDL program is to allow more businesses greater and more flexible support from the over $150 billion in available COVID EIDL funds. 

“It sounds like they have unspent money and now they’re putting it to work,” Brown said. 

Businesses that want to learn more about the EIDL program can go to www.sba.gov/eidl for more information.