Updates on the EIDL for Local Business Owners

Sara F Gonzalez

With all of the floods, fires, storms, and other natural disasters that occurred in 2019, It proved to be a particularly costly year for natural catastrophes.

Then came 2020, who said, "Wait until you see what I've got!"

For decades, the Small Business Administration (SBA) ran a little-known federal loan programme that provided short-term working capital to small businesses affected by natural catastrophes. During the 2019 fiscal year, the Small Business Administration (SBA) issued roughly 800 million in catastrophe loans to small businesses. However, the Small Business Administration (SBA) will offer 191 billion in catastrophe loans to small firms in 2020.

It's only a slight bit more.

They're still not finished... and there are some new things you should be aware of.

Despite the fact that we're buried with end-of-quarter issues and a slew of business tax work... I wanted to send you this little overview so you'd know when it was available during this odd stimulation season.

We're right here for you, as usual: https://calendly.com/saragonzalez

Updates on the EIDL for Charlotte Business Owners

“When I hear somebody sigh, Life is hard, I am always tempted to ask, ‘Compared to what?’” -Sydney Harris

The Economic Injury Disaster Loan (EIDL, pronounced "idle" by those in the know) program provides a key lifeline to business enterprises that need it most, despite being overshadowed by the 525 billion loaned out via the brand new PPP loan scheme.

Unfortunately, the SBA was unprepared to jump from offering 42,000 catastrophe loans in a single year to 3.6 million in a single year. SBA computer systems came to a halt as a result of the sudden influx of loan applications, forcing loan processors to work exhaustingly long hours and leaving desperate small business owners terribly upset.

To top it off, the SBA had only a weekend to integrate a new addition to the current EIDL program, which had been added by the CARES Act. What is this new addition? A $10,000 advance against the EIDL that wouldn't have to be repaid...basically a government giveaway.

The SBA was scared of running out of money for the program due to a significant backlog of loan applications.

So... the Small Business Administration (SBA) made two rulings that aroused the wrath of both business owners and Senators.

SBA Decision 1: The $10,000 EIDL grants were capped at $1,000 per firm employee. Many members of Congress were incensed by this, claiming that such a limit was not intended by Congress. They even accused the SBA of making it up because no such phrase existed in the CARES Act law.

SBA Decision 2: The SBA decided to cap each EIDL at $150,000 or six months' worth of operating capital, whichever was lower. The SBA is required by the present EIDL standards (last revised in 2018) to offer catastrophe loans to affected businesses as soon as possible... loans that cover up to four months of working capital or $300,000, whichever is less. This so-called Phase I loan does not require proof of economic harm. Phase II loans, which are subject to more examination, can be for up to $2 million.

When you're suddenly unable to operate your business but still have expenses to pay, and the exact calamity you're facing has no end in sight... Well, you're probably going to be irritated by the $150,000 limit.

After hearing the outcry and receiving extra funds from Congress, the SBA said last week that the six-month or $150,000 cap will be lifted.

An EIDL can now be used to cover up to 24 months' worth of working capital, up to a maximum of $500,000. Nevertheless a little short of the original $2 million cap, but still fantastic news if your company is in desperate need of cash.

If you haven't applied for an EIDL yet, or if your loan application was lost in the shuffle last year, now is a good time to do so. The loans are for a period of 30 years and have an attractive interest rate of 3.75 percent. The rate for non-profit organizations is much better, at only 2.75 percent.

Furthermore, you will not be required to begin making payments on the loan until 2022. The first payment on any EIDL issued in calendar year 2020 will not be due for another 24 months after the loan was issued. You won't have to start making payments on loans issued this year for another 18 months. If your EIDL was issued before 2020 – for example, not as a result of COV-19 – you are entitled to a payment holiday until March 31, 2022.

Unfortunately, interest continues to collect everyday during these payment delays.

Because the SBA has already awarded over $10 billion in new catastrophe loans to over 100,000 small businesses in 2021, the program is still going strong. The SBA's capacity to handle loan applications has increased to over 10,000 per day as a result of technological upgrades and the award of two contracts to outside companies to assist with loan processing. This is a significant improvement over the 900-per-day cap that created so much consternation a year ago.

Update on the PPP

Before I go off, I'd be remiss if I didn't highlight some crucial developments about the EIDL's more well-known relative, the PPP loan. The Senate passed the PPP Extension Act of 2021 last week. The deadline to apply for a PPP loan has been extended by 60 days as a result of this legislation. As a result, you now have until May 31 to apply for your PPP loan, regardless of whether it is the first or second draw. Furthermore, the bill provides the SBA until June 30 to process these new applications, rather than a "too bad, so sad" processing limit that coincided with the application deadline.

If you haven't already done so, now is the time to apply for your EIDL, first PPP, or second PPP loan. These initiatives are designed to assist small businesses who are experiencing financial difficulties. If you require assistance, please contact us at the following address:


We’re in your corner…


Sara Gonzalez

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