Small Business Owners and COVID-19

The COVID-19 pandemic has affected every one of us—but perhaps none more so than small businesses owners. A May 2020 study, conducted by the Society for Human Resource Management, reported that 42% of small business owners had to close their business as a result of the pandemic and that 62% of small businesses experienced a decrease in revenue. In November 2020, Vice President Harris acknowledged these bleak circumstances by confirming that one in four small businesses in the US have closed due to COVID-19.

Over the last year and a half, the federal government has taken steps to produce a more hospitable environment for small businesses and to lighten the load on small business owners. The US Small Business Administration (“SBA”) introduced such an initiative during the early stages of the pandemic called the COVID-19 Economic Injury Disaster Loan (“EIDL”). EIDL is designed to provide accessible and borrow-friendly capital to small businesses in hopes of diminishing the adverse economic impacts of the pandemic. These funds can be used by small businesses for normal operating expenses and working capital, such as payroll, purchasing equipment, and paying debt.

Changes to the Economic Injury Disaster Loan

On September 8, 2021, the SBA adopted a number of substantial policy changes to the EIDL program that could affect your small business. These policy changes include:

• Increased COVID-19 EIDL Cap: The SBA has made higher loan amounts available to small businesses by increasing the cap from $500,000 to 2 million dollars. The interest rates for businesses (3.75%) and non-profit organizations (2.75%) will remain the same for loans that exceed $500,000. However, the SBA will not issue a decision on a loan application that exceeds $500,000 until October 8, 2021. Furthermore, the minimum credit score for obtaining an EIDL loan over $500,000 is 625, as opposed to a loan that is less than or equal to $500,000 (570).
• Expanded Eligible Use of Funds: The SBA has also increased the flexibility of these funds, by permitting these funds to be applied not only to payment, but prepayment, of commercial debt, as well as regularly-scheduled payments of federal debt.
• Deferred Payment Period: The SBA will provide a two-year deferment from the time of the loan’s origination for all loans. Furthermore, existing loans with less than a 24-month deferment will be adjusted.
• Simplified Affiliation Requirements: The SBA simplified the affiliation requirements to mean a business that you control or have 50% or more ownership of, modeling the requirements of the Restaurant Revitalization Fund.

Read the SBA’s summary of its policy changes here. SBA Administrator Isabella Casillas Guzman stated, “Our mission-driven SBA team has been working around the clock to make the loan review process as user-friendly as possible to ensure every entrepreneur who needs help can get the capital they need to reopen, recover and rebuild.” The SBA stands ready to receive new applications immediately from small businesses looking to take advantage of these recent changes to the EIDL program.

Available Benefits for Small Businesses

If you wish to avail yourself to the benefits of these changes to the EIDL, you should file your application as soon as possible—the deadline for applications is December 31, 2021. To learn more about eligibility for the EIDL program, visit https://www.sba.gov/funding-programs/loans/covid-19-relief-options/eidl. For help with filing a loan application with the SBA, contact one of CGA’s business law attorneys or use the CGA online question feature to set up a consultation.

John Wilson

Attorney

John completed his Juris Doctorate in National Security Law and Policy at George Mason University’s Antonin Scalia Law School in 2021.

John may be reached directly at (717) 848-4900 ext.152 or by email: jwilson@cgalaw.com.