The U.S. Small Business Administration (SBA) has announced a significant increase in the amount businesses can borrow through the agency’s Covid-19 Economic Injury Disaster (EIDL) program. The loan amount cap will be raised to $500,000 (from $150,000) starting on April 6. The higher maximum loan will apply to all new Covid-19 EIDL borrowers, and companies with previous EIDL loans will be able to apply for additional funds under the new cap.
The program is now also available to nonprofit organizations, small agricultural cooperatives, sole proprietors, independent contractors, and any other business cooperative, ESOP, or tribal small business with fewer than 500 employees, and have been in existence on or before January 31, 2020. More than 3.7 million businesses have borrowed more than $200 billion at interest rates of 3.75% for small businesses, including sole proprietors and independent contractors, and 2.75% for not-for-profits. The loans are not forgivable, but there is a 24-month waiting period before repayment must begin.
Borrowers can use Economic Injury Disaster Loans to pay sick leave to employees unable to work due to the direct effect of Covid-19; maintain payroll to retain employees; meet increased costs to obtain materials unavailable from the business’ original source because of supply chain issues; pay rent or mortgage payments; and repay certain obligations that cannot be met due to revenue losses.
Borrowers cannot use loans to pay dividends, bonuses, or disbursements to owners (unless directly related to business services), for facility expansions, to refinance long-term debt, or to pay down other federal loans. EIDLs are not designed to replace lost sales or revenue.
For additional information on the SBA’s EIDL program or other pandemic relief opportunities, please contact Gray, Gray & Gray at (781) 407-0300 or visit our Covid-19 resource page.