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.
Business owners may use the funds of 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.
Businesses can apply for the increased loan amounts right away, the SBA said Thursday when it announced the revised caps. However, it will begin approving loans greater than $500,000 on October 8.
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.
The raised cap on the loans comes as cases of the coronavirus are again on the rise, fueled by the highly transmissible Delta variant. The loans have been a lifeline for many small businesses that have experienced a range of economic obstacles, including lockdowns, labor shortages, and supply chain issues.
Applications for the EIDL program and PPP loans are open. Businesses can apply online through the SBA. There are no application fees for loans of $25,000 or less. Loans greater than $25,000 require a $100 application fee and collateral. Loans greater than $500,000 require a $100 application fee, in addition to any associated fees for filing a lien on the applicant’s assets. A personal guaranty is also required for loans greater than $200,000.
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.
The SBA is also accepting new applications for EIDL advance grants up to $10,000 for businesses of 300 or fewer employees in low-income communities, and who can prove more than 30% reduction in revenue.
EIDL applications will close on December 31, 2021, unless the program’s funding runs out sooner.