Many businesses have taken advantage of the Economic Injury Disaster Loan (EIDL) program under the CARES Act since March of 2020. According to the Small Business Administration (SBA), loans totaling $200 billion have been approved for over 3.7 million businesses throughout the United States. The most recent stimulus bill that was signed into law in December 2020 contained another $20 billion for the EIDL program. In addition, the SBA has announced two significant changes in that program that are designed to aid more small businesses as they continue to struggle with the economic impact of the COVID-19 pandemic.
First, the maximum loan under the EIDL program has been raised effective April 6, 2021, from a limit of $150,000 to $500,000. With the pandemic lasting longer than originally expected, the larger loan amounts will provide more assistance in support of the nation’s small businesses, including sole proprietors, independent contractors, and not-for-profit entities. All loan applications that are currently in process will automatically be considered for the new maximum limits. Existing COVID-19 EIDL borrowers will be able to request an increased loan amount beginning April 6.
Also, the SBA announced that they are extending the deferment period for borrowers commencing to make loan payments that will mean that no payments are due until 2022. The deferral details differ a bit depending on the calendar year in which the disaster loan was made.
For SBA disaster loans made in 2020, the first required payment is now due 24 months from the date of the note. For loans made in 2021, the first payment date is 18 months after the loan date. In both cases, prior to this new extension, the timeframe to begin making payments was 12 months after the loan was made. There are also lengthened payment timeframes for borrowers whose SBA disaster loans were approved before 2020 in regular servicing status as of March 1, 2020. It is important to note that borrowers may voluntarily make payments during the deferment period, as interest will continue to accrue on the loan balance during this period.
While the EIDL loans did not garner as much initial attention as other COVID relief and stimulus programs, they are certainly an option for many businesses who qualify for them. With larger maximum loan amounts and an extended payment deferral period, it may be time to take a hard look at the benefits that can be obtained through the EIDL program. For more information on the EIDL program, contact your local CRI professional.