Now, the SBA has made major modifications to the EIDL program that expands the cap for loans. The cap has increased from $500,000 to $2 million, and low-interest loans can now be paid back over 30 years. Funds from this program may be used for any operating expenses, including purchasing equipment and making payments on debt. 

The SBA also made changes that make it easier for the small business communities still reeling from the pandemic, to access the more than $150 billion in funding for available loans.

Other new updates to EIDL include: 

Increased COVID EIDL cap

The biggest and most significant change to the former EIDL program, is the cap to $2 million. Businesses can apply for this loan to put proceeds towards working capital to make regular payments for operating expenses, including payroll, rent/mortgage, utilities, and other ordinary business expenses, and to pay business debt incurred at any time past, present, or future.

Longer deferred payment window

Now, business owners can have peace of mind knowing they do not need to begin repayments on EIDL until two years after loan origination. This deferment period allows businesses to keep operating as normal and get through the pandemic without having to worry about making ends meet or keep track of immediate deadlines. Payments are deferred for the first two years, during which interest will accrue, and payments of principal and interest are made over the remaining 28 years – but no penalties on businesses for prepayments. The SBA previously had implemented an 18-month deferment period for loans made during 2021.

30-day exclusivity window 

An additional change to keep in mind is an implemented 30-day exclusivity window of approving and disbursing funds for loans of $500,000 or less. The approval and disbursement of loans over $500,000 will begin on October 8, 2021.

Expanded qualifications for eligible use of funds

In addition to an increased cap, the EIDL now allows more expenses that qualify for use of funds. This now includes payments on all forms of business debt, including loans owned by a federal agency (including SBA) or a small business investment company (SBIC) licensed under the Small Business Investment Act.

Before this update, proceeds could only be used to pay for expenses necessary for the upkeep of the business until normal operations could resume, and for expenditures necessary to alleviate a specific economic injury. This limited businesses and prohibited payments on federal debt or prepayment of non-federal existing debt, even if the debt has a balloon payment due.

Simplification of affiliation requirements

One of the headaches for businesses when it came to relief programs was the application process. Often time the steps were hard to follow, there was confusion around who and what qualified and businesses had to be mindful of ever-changing deadlines. As a response to this, The SBA has also streamlined the application, approval and disbursement processes to deliver more aid to businesses. Eligible businesses can apply for loans through the SBA's website through December 31, 2021. Recipients of Paycheck Protection Program loans may also apply for EIDL funds. This was modeled similar to those of the $28.6 billion Restaurant Revitalization Fund (RRF). This was done in the effort to coordinate affiliation rules among other lending programs through the SBA, and to create consistency across other existing programs.

How businesses can take advantage of SBA programs

The newly updated COVID EIDL program will make it easier for businesses to apply for loans and funding to keep businesses operational while on the road to normalcy and recovery. The increased cap, longer deferred repayment window, expanded use of funds and simple application process ensures businesses can benefit from this relief, and allows more businesses greater and more flexible support from the over $150 billion in available EIDL funds. This update applies for businesses who both have and have not already applied for EIDL.

However, there are a different set of steps new and returning applicants will need to follow. If a small business has already obtained a loan via EIDL, do not apply for another loan or your application may be flagged as a fraudulent application, rather go into the existing SBA account and apply for an increase.

The purpose of SBA's loans is to support small to mid-sized businesses and encourage lending so these enterprises can start, grow and expand. Now is a great time for small business owners to apply for an SBA loan and take advantage of these money-saving, limited-time loan enhancements.

Denise Neamon, CPA is a Partner at The Bonadio Group and Office Managing Partner of the East Aurora and Batavia office. For more information, visit www.bonadio.com.   

Disclaimer: The information presented in this article should not be considered legal advice or counsel and does not create an attorney-client relationship between the author and the reader. If the reader of this has legal or accounting questions, it is recommended they consult with their attorney or accountant.