The Small Business Administration has raised the cap on COVID-19 related loans from $500,000 to $2 million, to help small businesses recover from the COVID-19 pandemic. The agency is set to begin approving loans with the higher caps Oct. 8.
EIDL applications will close Dec. 31, 2021, unless the program’s funding runs out, 2021 sooner.
Here’s the lowdown:
Use of funds: Business owners may use the funds the Economic Injury Disaster Loans (EIDL) towards operating expenses over 24 months such as payroll, rent, buying equipment and materials, or paying off debt. Funds may now also be used to prepay commercial debts and federal business debt.
Eligibility: Eligible applicants include small businesses with 500 or fewer employees, non-profits, independent contractors, freelancers/self-employed, and limited types of franchise affiliates that have been in business since January 31, 2020, according to SBA guidelines.
How to apply: Businesses can apply online through the SBA. There are no application fees for loans of $25,000 or less. Loans above $25,000 require a $100 application fee and collateral. Loans greater than $500,000 require a $100 application fee. A personal guaranty is also required for loans greater than $200,000.
Terms: Loan terms are 3.75% interest for businesses and 2.75% for non-profits, with a maximum period of 30 years. Borrowers will not have to begin repaying their loans until two years from origination.
Grant program: The SBA is also accepting new applications for EIDL advance grants up to $10,000 for businesses of 300 or fewer employees in lower income commumities that can show a revenue drop of more than 30%.