SBA Covid Loan Changes

SBA Announces Changes to COVID Disaster Loan Program

The Small Business Administration (SBA) has expanded access to critical relief funding for businesses still struggling from the effects of the COVID-19 pandemic.

Changes to the SBA’s COVID-19 Economic Injury Disaster Loan (COVID EIDL) program will:

  • Expand eligibility to new businesses;
  • Allow for additional qualified expenses; and
  • Align affiliation rules.

The changes were outlined in a new interim final rule (IFR) that went into effect on September 8.

UPDATE: In addition to the below changes, which were outlined in the IFR, the SBA also announced on September 9 that they were lifting the previous COVID EIDL cap from $500,000 to $2 million. Loan funds can be used for any normal operating expenses and working capital, including payroll, purchasing equipment, and paying debt (see more below).

Expanded Eligibility

The new IFR expands eligibility for COVID EIDL loans to certain businesses previously left ineligible. Notably, the list now includes businesses such as restaurants and entertainment & recreation businesses, which were particularly hard-hit by the pandemic. Businesses with up to 20 locations can apply for an EIDL if they have less than 500 employees per location.

The EIDL eligibility should help booster the needs of food services businesses, many of which were not able to secure funding through the Restaurant Revitalization Fund (RRF) – enacted as part of the American Rescue Plan Act – which exhausted its funds back in July.

Expenses

The new rules also widen the list of eligible expenses for which EIDL proceeds may be used. While previously, businesses were only able to apply EIDL funds to necessary operational expenses, the new rules will allow borrowers to use the funds to pay off all forms of commercial debt, including federal debt and credit card debt.

Affiliation Rules

To streamline affiliation rules amongst its loan programs, the SBA is aligning affiliation rules for the EIDL program with the simpler rules that Congress applied to the RRF. Now, affiliated businesses may apply for a COVID EIDL as long as the eligible entity “has an equity interest or right to profit distributions of not less than 50 percent, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of January 31, 2020.”

The COVID EIDL program is set to expire at the end of the year.

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