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New EIDL Policy Changes In a Nutshell

Nida Bohunr | October 7 2021

In September this year, the Small Business Administration (SBA) announced some key changes to its Economic Injury Disaster Loan (“EIDL”) Program. The disaster loan provided by the SBA is currently not limited to small businesses as non-profit organizations and enterprises involving the agricultural sector may also apply.

With the release of the EIDL updates, many small business owners are having a slightly difficult time in not only understanding the changes but also in discerning how their chances of applying or updating their EIDL have been affected.

 

What is the EIDL?

In a nutshell, EIDL (or The Economic Injury Disaster Loan) is an SBA disaster loan program that serves small businesses affected by natural disasters in the U.S. If you’re wondering whether the COVID-19 pandemic is considered a natural disaster, then the answer is YES. EDIL can and does support recovery from the pandemic disaster. There’s a cap of up to $2 million in financial assistance from the SBA for which small businesses, independent contractors and sole proprietors can apply.

Payable for up to a period of 30 years, the EIDL can help your business meet the required financial burden that COVID-19 created for small business owners. The EIDL however does not cover your lost revenue or possible sales.

What EIDL does cover is a wide range of expenses for the use of its proceedings.

These also include: 

    • Running working capital.
    • Payrolls (present and future).
    • Business premises rent or mortgage.
    • Any debt undertaken in the past, present or future

 

Who can apply for an EIDL?

Wondering whether you qualify for the COVID-EIDL?

Answer the questions below:

    • Are you physically living in the United States or its designated territories?
    • Has your business suffered heavy losses because of the COVID-19 pandemic?

If your answers are “yes” to both, then you are eligible to apply for an EIDL.

There are quite a few other considerations, such as:

    • Immigration Status
    • No. of employees (variable number depending on the type of business running)
    • Registered starting date
    • Child support payments
    • Prior felonies, etc.

The bottom line is this. Being a federal program, all loans provided by the government will have a long list of sub-criteria to be met. 

What are the changes to the EIDL policy this September?

There are several changes in the original EIDL policy, which took effect in September 2021.  We have consequently summarized these updates to make it as easy as possible for a normal business owner to understand the gist of the changes.

 

1. Loan Cap Limit Increased

    • There is an increase in the maximum loan cap from the previous $500,000 to $2 million. 
    • From October 8, 2021, onwards, SBA will approve loans greater than $500,00. 
    • This will enable businesses to recover disaster costs if they were over the previous maximum limit before, and enhance their working capital for the future.

 

2. Usage of Funds For Debt Repayment

    • The funds received from the EIDL loan could now also be used to apply to payment and prepayment of any non-federal commercial debt, as well as regularly-scheduled federal debt that has occurred in any time past, present or future. 
    • This will allow you to allocate funds with more flexibility and plan your payments with greater ease.

 

3. Increase in Deferment Period for Repayment

    • There is an extension for the maximum loan deferment period to 24 months from SBA for all loans. This also includes the EIDL.
    •  This is emphatically part of the SBA’s company-wide policy change.
    •  In addition, any existing loans that have a current deferment period of fewer than 24 months will be adjusted accordingly by the SBA.

 

4. Simplified Affiliation Requirements 

    • Initially, the affiliation requirements criteria for business owners were complex and full of loopholes.
    • Therefore, many business owners had a difficult time understanding and navigating the SBA’s form for the EIDL. 
    • The latest update has simplified the affiliation requirement for all candidates. 
    • The new policy simply defines affiliated businesses as those in which:
      • Firstly, the applicant has sole ownership if it is a sole proprietorship.
      • Secondly, the applicant has over 50% shares of ownership.

 

5. Clarification on Eligibility for Newly Included Businesses

    • SBA has introduced additional options to help meet requirements for an EIDL.
    • These additions will now pertain to the following NAICS codes for businesses:
      • 61 Educational Services
      • 71 Arts, Entertainment and Recreation
      • 72 Accommodation and Food Services
      • 213 Support Activities for Mining; Industry group
      • 3121 Beverage manufacturers
      • 315 Apparel Manufacturing
      • 448 Clothing and Clothing Accessories Stores
      • 451 Sporting Good, Hobby, Book and Music Stores
      • 481 Air Transportation
      • 485 Transit and Ground Passenger Transportation
      • 487 Scenic and Sightseeing Transportation
      • 511 Publishing Industries (except Internet)
      • 512 Motion Picture and Sound Recording Industries
      • 515 Broadcasting (except Internet)
      • 532 Rental and Leasing Services
      • 812 Personal and Laundry Services. 
    • There is an additional clause that states that the business should not have more than twenty locations or more than five hundred people working in any particular location. 
    • You can check the official  Code of Federal Regulations site or you could:

 

6. Cap Limit for Corporate Groups 

    •  Corporate groups manage many individual small businesses by usually having a stake in the company.
    • However, businesses that are majority-owned, directly or indirectly, by a common parent group are part of a corporate group. 
    • Therefore, this makes corporate groups eligible to receive the SBA’s COVID-19 EIDL.
    •  In addition, the new update places a $10 million upper limit on the maximum amount of total COVID-19 EIDL loan that can be given to a single corporate group.

This ensures there is no monopoly of SBA loan funds, and above all, businesses in the United States of America have an equal opportunity of acquiring the COVID-19 Economic Injury Disaster Loan.

 

How We Can Help You

At Monily, our integrated approach to aspiring startups and small/medium-sized businesses spans accounting, bookkeeping, payroll management, financial reporting, tax preparation, and more. We take care of the most time-consuming function of your business and hence, let you focus on what matters to you the most –– running and growing your business!

Our seasoned accounting and tax specialists are on hand to guide you through applying for an EIDL. We will also assist in avoiding the pitfalls and errors when applying and more importantly, actually qualify your business for receiving an EIDL. We understand that time is of the utmost importance and therefore, Monily will assist you every step of the way.

If your business is a new startup, you might be interested in glancing through our 12 Ways To Raise Money For a Startup and  How To Reduce Your Startup’s Operating Expenses articles.

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Author Bio

A highly skilled accounting professional at Monily, having extensive and diverse experience of working in US healthcare and agriculture industry. Nida is a CA finalist with expertise in Bookkeeping, Auditing, Bank Liaison, Tax Preparation, Accounts Payable, Accounts Receivable.