Image via SBA.gov
At the end of 2020, the United States Small Business Administration (SBA) announced that it would extend the application deadline for COVID-19 Economic Injury Disaster Loans (EIDLs) until the end of 2021. These loans serve as an additional lifeline for struggling small businesses alongside the Paycheck Protection Program (PPP). Small businesses, nonprofits, and agricultural businesses are eligible for EIDLs if they have suffered “substantial economic injury" as a result of the pandemic.
Before the extension was announced, only 34 percent of small businesses had applied for these loans, but of those who did, a majority received favorable results. Here's a snapshot of responses to an NFIB survey from December:
More recently, the SBA announced an increase to the lending limit for EIDLs. As of April 6, 2021, the loan limit has been raised from six months of economic injury with a maximum loan amount of $150,000 to up to 24-months of economic injury with a maximum loan amount of $500,000.
SBA Administrator Isabella Casillas Guzman commented, “More than 3.7 million businesses employing more than 20 million people have found financial relief through SBA’s Economic Injury Disaster Loans, which provide low-interest emergency working capital to help save their businesses. However, the pandemic has lasted longer than expected, and they need larger loans. Many have called on SBA to remove the $150,000 cap. We are here to help our small businesses and that is why I’m proud to more than triple the amount of funding they can access."
Applicants eligible for COVID-19 EIDLs include:
- Businesses with 500 or fewer employees or defined as small per SBA.gov/SizeStandards
- Cooperatives with 500 or fewer employees
- Agricultural enterprises with 500 or fewer employees
- Most private nonprofits
- Faith-based organizations
- Sole proprietorships and independent contractors
Businesses who received a loan subject to the previous limits are not required to submit a request for an increase as the SBA indicated it would be contacting them directly via email to provide details about how they can request an increase. New loan applications are automatically considered for loans covering 24 months of economic injury up to the $500,000 maximum.
The increased lending limit comes after the SBA announced it would extend deferment periods for all disaster loans, including COVID-19 EIDLs, until 2022. This gives businesses more time to build themselves back up before they have to make their first payment. In order to shift all EIDL payments to 2022, the SBA said it would extend the first payment due date for disaster loans made in 2020 to 24-months from the date of the note and to 18-months from the date of the note for all loans made in 2021.
In related news, President Joe Biden recently signed the PPP Extension Act of 2021 into law, extending the PPP to the end of May, with an additional 30-day period for the SBA to process applications that are still pending.