Advances are no longer available but favorable loans are still granted
By Richard D. Harroch
On July 11, 2020, US Small Business Administration (SBA) announced that it will no longer provide advances under the Economic Disaster Lending Program (EIDL).
The EIDL Advance Program has provided small businesses, independent contractors, nonprofits, and farm businesses with a total of $ 20 billion in emergency funding. See SBA opens new grants and loans for small businesses and independent entrepreneurs: the EIDL program.
The EIDL Advance Program provided a grant of $ 1,000 per small business employee, up to a maximum of $ 10,000. Independent contractors were entitled to $ 1,000. The grant did not need to be repaid. Recipients did not need to be approved for a loan to receive the advance.
SBA Administrator Jovita Carranza said:
“Following the enactment of emergency COVID-19 legislation, the SBA has provided nearly six million small businesses employing 30.5 million people $ 20 billion through the unprecedented EIDL Advance program. This program, built from the ground up in less than two weeks, has helped millions of small businesses, including nonprofits, sole proprietors and independent contractors, from a wide range of industries and activity area.
After allocating the full $ 20 billion allocated by Congress, the SBA said it would stop making EIDL advances to new candidates. By law, the SBA is not allowed to issue new EIDL advances once all program funding has been committed.
It is possible that Congress will allocate more funds to the advance program as it did in April 2020.
The good news: EIDL loans still available
The good news is that the SBA is still processing loan applications for EIDL loans. These are available for small businesses, independent contractors, concert workers, nonprofits, and farm businesses. But the available funds may run out soon, so it’s best to apply as soon as possible.
EIDL loans have the following key terms:
- The loan amount depends on your business and what the SBA deems appropriate (loans range from $ 1,000 to $ 2 million, although there may now be a limit of $ 150,000).
- The interest rate is 3.75% (2.75% for non-profit organizations).
- The SBA will perform a credit check.
- The loan is repayable over 30 years (so the monthly payments are manageable).
- All payments are deferred for one year (but interest accrues during that year).
- The loan is prepayable at any time without penalty.
- Loans over $ 25,000 may require collateral.
- Loans over $ 200,000 may require a personal guarantee.
- Unlike PPP loans, EIDL loans are non-repayable.
What can EIDL loans be used for?
EIDL loans can be used for:
- Working capital to continue operations
- Expenses needed to mitigate the specific economic harm suffered by COVID-19
- Sick leave for employees unable to work due to direct effects of COVID-19
- Payroll maintenance
- Increased procurement costs
- Rent or mortgage payments
- Repayment of debt that cannot be repaid otherwise due to loss of income
Proceeds from the EIDL loan cannot be used to refinance debts incurred before COVID-19 or repair physical damage or pay dividends.
How to apply for an EIDL loan
The application process is relatively straightforward and only takes around 15 minutes. Here is where you can apply.
Copyright © by Richard D. Harroch. All rights reserved.
About the Author
Richard D. Harroch is Managing Director and Global Head of Mergers and Acquisitions at VantagePoint Capital Partners, a San Francisco-area venture capital fund. He focuses on the Internet, digital media, and software companies, and he was the founder of several Internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, FoxBusiness, and AllBusiness.com. Richard is the author of several books on start-ups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal bestseller on small business. He is the co-author of a 1,500-page book by Bloomberg — Private Company Mergers and Acquisitions: Analysis, Forms and Agreements. He was also a partner in corporate law and mergers and acquisitions at the law firm Orrick, with experience in startups, mergers and acquisitions and venture capital. He has been involved in over 200 M&A transactions and 500 start-ups. He can be reached by LinkedIn.