The Small Business Administration is expected to lift the cap on its Covid Economic Injury Disaster Loans (EIDL) sometime after Labor Day on September 6, bringing the low-interest long term loan available to any small businesses struggling amid the pandemic back up to $2 million. 

The cap was set at $500,000 in March 2021, after the SBA spent several months approving only loans of up to $150,000. Traditionally, the EIDL loan program–which has a 30-year maturity date–has a $2 million cap and loan interest terms that range from 2.75 percent for nonprofits to 3.75 percent for businesses.

Despite the promising news, not every business will have access to the expanded funds. The amount for which you qualify now is based on your 2019 total revenue minus your cost of goods sold, less any EIDL already received. Plus, it’s not yet clear what the requirements will be regarding whether you have to prove economic injury. You may have to show your 2020 numbers and demonstrate financial loss to get any kind of supplemental EIDL.

SBA’s plan to lift the cap has been expected for weeks, and there have been delays. The agency said it would release a revised EIDL application on August 16, and even on August 15 the new application made a brief appearance on, but that didn’t stick.

It’s unfortunate, as there’s still plenty of money left. As of August 19, the SBA has approved more than 3.8 million EIDLs worth $259 billion. Congress appropriated $50 billion for EIDL to support up to $367.1 billion in lending authority. That means that approximately 54,000 business would be able to get the $2 million EIDL loan.

Any additional delay, could cut into businesses’ abilities to get this funding. While the program is set to sunset at the end of this year, it is possible that the remaining funds could be transferred to the new $1 trillion infrastructure bill, which the House is expected to pass by September 27, 2021. 

The other fascinating development is that the SBA is expected to widen the eligible expenses that may be paid for with an EIDL. Borrowers may be able to use the money to pay off any commercial debt, including credit cards and government-backed debt. Previously, using the proceeds to pay off commercial debt was off limits, and refinancing is not permitted.

I expect there to be a mad dash: with hundreds of thousands of business owners trying to take advantage of the additional funds now available. However, the money may only be available for a fraction of them. This will be a win for the lucky lottery winners, but unfortunate for those whose businesses were hit by Covid-19 and desperately need the money.

In my opinion, it seems that the SBA wants to prove its speed and processing capabilities instead of using the program as it is intended and focusing on those in desperate need. That being said, if you are interested in applying, there’s no time like the present.

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