Best Practices: SBA Enhances its Disaster Loan Program to Meet the Needs of Small Businesses Impacted by the COVID-19 Delta Variant

Effective September 8, 2021, SBA enhanced its COVID-19 Economic Injury Disaster Loan (EIDL) program to assist small businesses to meet their financial obligations and operating expenses despite the suffering created by the Delta variant.  With over $150 billion in funding available, SBA is determined that small businesses receive the help they need to survive, especially businesses from low-income communities.   Unlike PPP loans, COVID EIDL loans are long term loans (i.e. 30 years) made directly by the SBA which have a low fixed interest rate of 3.75% for businesses and 2.75% for non-profit organizations and contain two years of deferred payments.

SBA is enhancing its efforts by making several important changes to the COVID EIDL program to aid small businesses, including the following:

• COVID EIDL Cap Increase – Whereas the COVID EIDL cap was previously set at $500,000, the cap has now been increased to $2 million.
• 30 Day Exclusivity Window – However, from September 8, 2021 to October 8, 2021, SBA will only approve COVID EIDL loans of $500,000 or less to make sure that resources and funds are devoted to extending loans to the smallest businesses that may be experiencing capital shortages.
• Deferred Payment Period – In order to ensure that small business owners will have the ability to survive the pandemic without having to worry about meeting short term obligations, loan payments are deferred for the first two years of the loan (although interest will accrue). Principal and interest payments will begin in year three for the remaining 28 years of the loan, although prepayments are permitted without penalty.
• Expansion of Eligible Use of Funds – COVID EIDL funds can now be used to pre-pay (and pay) commercial debt and pay regularly scheduled federal business debt payments, in addition to being used for equipment and inventory purchases, working capital needs and operating expenses, including payroll, rent or mortgage payments and utilities.
• Simplified Affiliation Requirements – Affiliation requirements have been simplified to more closely resemble those of the Restaurant Revitalization Fund.
• Changes to Size Standards – SBA has created additional ways to meet program size standards for businesses that have no more than 500 employees per physical location, and have no more than 20 locations, and meet all other COVID EIDL eligibility requirements and are assigned NAICS codes beginning with 61, 71, 72, 213, 3121, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532 or 812 (industries that have been particularly impacted by the COVID-19 Delta variant).
• Added Maximum Cap on Corporate Groups – There is now a $10 million maximum limit on aggregate COVID EIDL loans made to a single corporate group, meaning groups that are majority owned by a common parent.

SBA is accepting applications for the COVID EIDL program through December 31, 2021.  For questions regarding the SBA COVID EIDL program and other forms of federal relief for small businesses, contact the attorneys at Starfield & Smith at 215-542-7070.