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Good EIDL news continues – $500,000 is new loan limit

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The U.S. Small Business Administration has increased the maximum eligible amounts for the Economic Injury Disaster Loans (EIDLs). The change comes less than two weeks after the administration announced that it was extending deferment periods for all its disaster loans, including the COVID-19 Economic Injury Disaster Loan Program. Loan recipients can now access up to $500,000 for up to 24 months of economic injury – up from a maximum of $150,000 for six months of economic injury. The changes take effect April 6.

Already applied?

The administration says you have not missed out on this increase if you already received a smaller loan. According to an update posted last week on its website, businesses that received a loan subject to current loan limits do not need to submit a request for an increase at this time. The “SBA will reach out directly via email closer to the April 6, 2021, implementation date to provide more details about how businesses can request an increase.” The administration also says that applicants have up to two years after the date of the loan promissory note to request additional funds and may continue to do so after the application deadline of Dec. 31, 2021.

Why is the increase so large?

According to the administration, the change was necessary to maintain the goal of the program while adjusting to the length of the pandemic. “More than 3.7 million businesses employing more than 20 million people have found financial relief through SBA’s Economic Injury Disaster Loans,” said SBA Administrator Isabella Casillas Guzman. “However, the pandemic has lasted longer than expected, and they need larger loans. Many have called on SBA to remove the $150,000 cap.”

The significant change of more than triple the previous amount available is connected with the amount of time that businesses have been under economic duress. The loans are calculated by determining an economic injury dollar amount, then multiplying the amount by the applicant’s Length of Disaster Declaration’ to determine the total loan amount. A business with an economic injury of $25,000 could receive that amount multiplied by only six months before reaching the limit. As most hospitality business owners can attest to, their economic injury did not significantly improve after six months. The administration recognized this, and raised the maximum eligible amount, at the same time extending the period for which applicants can claim economic injury. If a business experiences economic injury greater than the dollar amount initially established, the borrower is able to request an increase in the loan later.

Who is eligible?

The extension does not come along with any changes to eligibility requirements for applicants. Most small businesses with 500 or fewer employees are eligible, and the terms of the loan are still the same. The maturity date is 30 years for all loans and after the extension announced in March, recipients may defer their first payment 18 months from the date of the note for loans made in 2021 and 24 months from the date of the note for loans made in 2020. The interest rates remain fixed at 3.75% for businesses and 2.75% for nonprofits. Applicants who are approved for a loan after April 6 are still able to defer payment, but interest continues to accrue. It is important to note that while there is a deferment period, unlike the Payment Protection Program, these loans are not forgivable.

Haven’t applied yet?

You still have time! The administration is still accepting applications, and The Washington Hospitality Association has more information on the application process and the deferment period here on our Coronavirus Resource Hub. You can also view the application here.