The SBA announced numerous alterations to COVID-19 Economic Injury Disaster Loans (EIDL), including a huge increase to raising the cap from $500,000 to $2 million. When this announcement was made, the SBA stated it was making it easier for small businesses hit hardest from the pandemic to secure loans, with emphasis on restaurants, gyms, and hotels. This increase will help businesses access over $150 billion in available funding, and this is just one of the main adjustments.

Restaurant Relief

The SBA’s decision to make the loans more available for restaurants is very understandable as the Restaurant Revitalization Fund ran out of money in just weeks, and was even referenced in the interim final rule (IFR) the SBA released detailing the changes being made. Within the IFR it was stated that the Restaurant Revitalization Fund was given $28.6 billion to distribute, but received over 275,000 applications seeking over $72 billion in assistance. With the updates to the SBA’s EIDL program, restaurants will have additional funding available to them in this time of need.

Other Big Changes

Some of the other notable changes included in the updates to the EIDL are the implementation of a new deferred pay period and the establishment of a 30-day exclusivity window. The SBA stated that owners will not have to begin EIDL repayments until two years following loan origination, however, owners should note that during this time interest will still accrue. Following this two-year period, the payments on principal and interest are to be made over the remaining 28 years. The interest companies will be accruing is 3.75% for small businesses and 2.75% for non-profits.

To ensure that all businesses will be taken care of the SBA will be utilizing its 30-day exclusivity window to distribute funds to those requesting loans of $500,000 or less. Those businesses seeking loans of larger amounts will begin their approval and disbursement process following this 30 day period. The SBA also announced that those who borrowed under the lower cap may be eligible for additional funds, however, the December 31st deadline remains unchanged.

Increased Fraud Controls

According to the SBA, they have increased the fraud controls for these loans as there was a lot of controversy surrounding them when they were first released. Isabella Guzman, the SBA’s administrator has been quoted saying, “SBA has increased fraud controls and is working in collaboration with the SBA Inspector General to closely monitor the program” after acknowledging that this wasn’t the case last year.

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