- The Small Business Administration (SBA) raised the cap on Economic Injury Disaster Loans (EIDL) to $2 million, the agency announced on Thursday.
- The SBA said the federal disaster relief loan program is ready to receive new applications immediately from small businesses looking to take advantage of the new policy changes.
- “The SBA’s COVID Economic Injury Disaster Loan program offers a lifeline to millions of small businesses who are still being impacted by the pandemic,” SBA Administrator Isabella Casillas Guzman said in a statement on Thursday.
The recent raise follows a move the Biden administration made in April when it more than tripled the program’s original cap of $150,000 to $500,000.
The agency had originally instituted the $150,000 cap in May 2020 after fearing the program’s funds would be quickly depleted due to overwhelming demand.
“We’ve retooled this critical program — increasing the borrowing limit to $2 million, offering 24 months of deferment, and expanding flexibility to allow borrowers to pay down higher-interest business debt,” Guzman said.
Unlike the SBA’s Paycheck Protection Program (PPP) loans, which can be forgiven, EIDLs must be repaid.
The agency also said it “ramped up” its outreach efforts to ensure it is reaching the smallest businesses and those from low-income communities who may also be eligible for the SBA’s companion COVID EIDL Targeted Advance and Supplemental Advance grants totaling up to $15,000.
“Our mission-driven SBA team has been working around the clock to make the loan review process as user-friendly as possible to ensure every entrepreneur who needs help can get the capital they need to reopen, recover and rebuild,” Guzman said.
The loan funds can be used for any normal operating expenses and working capital, including payroll, purchasing equipment and paying debt, the SBA said.
Other changes include a deferred payment period which gives small business owners two years to begin COVID EIDL repayment after loan origination; establishment of a 30-day exclusivity window to ensure Main Street businesses have additional time to access the funds; and expansion of eligible use of funds, allowing borrowers to prepay commercial debt and make payments on federal business debt.
The SBA said it also eased the COVID EIDL application process for small businesses by introducing simplified affiliation requirements modeled after the Restaurant Revitalization Fund.
Amid the pandemic, the program has come under scrutiny over fraud concerns, an issue the SBA addressed on Thursday.
“The SBA has increased fraud controls and is working in collaboration with the SBA Inspector General to closely monitor the program,” the agency said on Thursday.
The SBA’s inspector general in July called for closer oversight, warning banks to investigate suspicious activity related to the coronavirus relief program.
JPMorgan Chase and Wells Fargo last year fired employees for improperly applying for and receiving EIDL funds.
The agency said it has also invested in optimized processes and has increased the average number of loan application decisions made.
“The SBA accelerated daily processing of loan increases from close to 2,000 applications to more than 37,000 applications daily,” the SBA said in a statement. “Loan officer productivity also went from 1.86 applications per day to 15 applications per day. As a result of these increased loan review rates, the 600,000+ loan increase backlog has been cleared and new applications can be processed immediately.”
Under the program, the SBA has made 3.8 million loans, totaling $263 billion, The New York Times reported.