Did you receive an economic injury disaster loan (EIDL) from the Small Business Administration (SBA)? While these loans were previously limited to $150,000, the SBA recently announced the limit has been increased to $500,000. Here’s what you need to know about the new loan limits.

What is an EIDL?

The Economic Injury Disaster Loan program provides low interest loans to small businesses (those with 500 employees or less) and nonprofit organizations to help offset revenue loss due to COVID-19.

How much do the loans cover?

The program previously limited the coverage to six months of economic injury, to not exceed $150,000. A recent policy change increases loan limits up to 24 months of economic injury, with loan amounts up to $500,000.

Note that for loans over $25,000, the SBA will continue taking a security interest in business assets. Also, the SBA will require an unsecured personal guarantee for loans over $200,000 from any individual with 20% or more ownership. For any loans of $500,000 or less, real estate collateral will not be required.

How do you request a loan increase?

The SBA will automatically review your prior application and email you instructions on how to request an increase to your existing EIDL if you qualify. The invitation email will be sent to the original email address that you used during the original application process.

How soon will you hear back from the SBA?

The SBA will process increase requests in the order they are received. It may be several weeks before you receive a response due to the high volume of requests expected.

Are businesses that did not take out a loan eligible for the increased loan amount?

Yes, businesses that did not take a loan yet are also eligible for the $500,000.

What is the deferment period?

The deferment period has increased as well. The first payment date for all loans is pushed to 2022. Businesses that applied in 2020 have a 24 month deferment and new businesses that apply in 2021 will have an 18 month deferment period.

Final thoughts –

Before applying for an EIDL loan increase or an EIDL loan in general, business owners should consider whether the loan makes sense for their business. Proceeds from EIDLs are restricted to working capital purposes and have restrictive covenants that the business must follow to be in compliance with the loan agreement. Business owners should also find out what other loan terms their existing banking relationship can provide before going forward with an EIDL loan or requesting an increase as they may be able to provide more flexible terms and conditions.

Wondering if you can benefit? We can help you navigate the loan request process. Contact us.