As of September 8, 2021, COVID policy changes around the EIDL loan program took effect. The changes to the program were a win for small business owners as they face continued challenges due to COVID-19. Let’s review how the program looks today.
Loan Maximum – Increased from $500,000 to $2,000,000
Interest Rate – Businesses – 3.75%; Nonprofits – 2.75% – Fixed Rate
Term – 30 years (see deferment below)
Deferment Period – 24 months for ALL loans (SBA will adjust deferment on loans that did not receive 24 months initially) – loans will accrue interest during the deferment period and payments of principal and interest will be repaid over 28 years
Use of Funds – You can now use EIDL funds to prepay commercial debt and to make regularly scheduled payments on Federal debt obligations, in addition to paying for standard operating expenses
There are certain requirements related to EIDL loans to consider as well:
Loans up to $25,000 – Do not require collateral or a personal guarantee
Loans greater than $25,000 – Require collateral
Loans greater than $200,000 – Require collateral and a personal guarantee
No loans greater than $500,000 will be approved prior to October 8, 2021. If you don’t have an existing EIDL loan you can apply online here. If you have an existing EIDL loan and would like to increase it, log in to your account on the SBA portal to submit a loan modification. You can expect anywhere from three to six weeks to receive a decision on your application.
I’ve written often on the EIDL loan program and had numerous conversations with small business owners about the good and bad with this program in the past. In most cases, the conversation centered around the favorable loan terms the program offers. 30 years at 3.75% are very good terms that most small business owners won’t see often or ever again. My opinion was simple – if a small business owner believed their business would survive this pandemic, then they should strongly consider taking on this debt.
The changes outlined above have only added to the attractiveness of the EIDL program. Small business owners now have the ability to refinance higher interest commercial debt with EIDL funds. This change alone could result in significant cash savings for small businesses in the coming years. Allowing small business owners to pay down government debt and having no payments for two years only sweetens the deal in my opinion.
My opinion this time around hasn’t changed much. I would ask the small business owner about their confidence in their business. There are more factors to consider today than there was a year or so ago. Will your business survive the pandemic and the employment crisis? If so, I would strongly consider applying for an EIDL loan. Even if you have doubts about your business as a going concern, you have the opportunity to take on this loan and repay it with no prepayment penalties. I think it is worth looking into simply as a “peace of mind” loan.
At Ceterus, we are experts in the small business government assistance programs. If you have any questions, please reach out to our team.
Relevant links to SBA information