The Small Business Administration (SBA) has approved $200 billion in disaster loans to 3.7 million borrowers since the COVID-19 Economic Injury Disaster Loan (EIDL) program began last year[1]. Unlike the forgivable loans made through the larger and more prominent Paycheck Protection Program (PPP Loans), the disaster loans must be paid back. But they carry a low interest rate and a long repayment term. Currently the disaster loans borrowing limit is capped at $150,000, however on March 24, 2021 the SBA announced that businesses harmed by the coronavirus pandemic can soon borrow up to $500,000. The new borrowing limit will take effect the week of April 6, 2021.
The previous $150,000 limit angered many borrowers who needed much more capital to survive during the pandemic. In addition, borrowers were frustrated during the application process because the SBA did not tell borrowers about the limit for months. The agency has $270 billion left to lend through EIDL program. Those who have already received loans but might now qualify for more money will be contacted and offered the opportunity to apply for an increase, the agency said[2].
The SBA also announced on March 12, 2021 that the agency has extended deferment periods for all disaster loans, including the EIDL program, until 2022. Disaster loans made in 2020 will have a first payment due date extended from 12-months to 24-months from the date of the note. Disaster loans made in 2021 will have a first payment due date extended from 12-months to 18-months from the date of the note. Disaster loans approved before 2020 that were in regular servicing status of March 1, 2020, will automatically be granted an additional 12-month deferment of principal and interest payments. The interest will continue to accrue on the outstanding balance of the loan throughout the duration of the deferment3.
Businesses of all sizes are continuing to be impacted by the economic effects of the COVID-19 Pandemic. If your business needs assistance on navigating during this difficult economic time , contact the experienced transactional attorneys at Goosmann Law in our Sioux City, Sioux Falls, and Omaha offices.
[1];3 SBA Press Release. (2021, March 24). SBA Extends Deferment Period for all COVID-19 EIDL and Other Disaster Loans until 2022. Retrieved from: https://www.sba.gov/sba-newsroom
[2] SBA Press Release. (2021, March 24). SBA to Increase Lending Limit for COVID-19 Economic Injury Disaster Loans. Retrieved from: https://www.sba.gov/sba-newsroom