January 5, 2020

Caity Roach
Editor

Hot Topic Tuesday — The Top 5 Things Lenders Need To Know About the EIDL Program

In August, the SBA issued a set of procedural notices informing SBA 7(a) and 504 lenders that credit memos must temporarily include an analysis of how PPP, EIDL, and other stimulus financing affects the borrower’s cash flow. As a result, SBA lenders should take note that the COVID-19 relief bill enacted by the President on December 27, 2020, extends the EIDL application deadline through December 31, 2021, and makes several adjustments to the program.

Here are the top 5 things SBA lenders need to know about SBA disaster loans:

  1. Terms
    EIDLs have a 3.75% interest rate for small businesses and a 2.75% interest rate for nonprofit organizations, a 30-year maturity, and an automatic deferment period of one year. The loan may be used for working capital and normal operating expenses.

  2. The EIDL Advance Grant
    The EIDL Advance grant was offered alongside disaster loans. The amount of the grant was determined by the number of employees indicated on the EIDL application ($1,000 per employee, up to a maximum of $10,000). Although the EIDL Advance program ended July 11, 2020, when it ran out of funding, the Consolidated Appropriations Act of 2021 will reinstate the program.

  3. EIDL Advance Deduction for PPP Forgiveness
    The Consolidated Appropriations Act of 2021 repeals the requirement that borrowers must deduct the $10,000 EIDL Advance amount from the forgivable amount of the PPP loan. If a borrower’s PPP loan forgiveness amount was previously reduced by the EIDL grant, the SBA must take action to remedy the issue.

  4. Second Draw
    As of December 31, 2020, Small businesses and nonprofits in low-income communities that suffered a 30% economic loss and have fewer than 300 employees are eligible to apply for and receive an advance grant of $10,000, or the difference between $10,000 and a previous advance grant amount.

  5. Program Popularity
    As of the end of November 2020 (SBA’s most recent data), the SBA has approved 3,645,556 EIDLs worth $194,374,549,652.

Click here to learn more about the EIDL program and stay up to date on the changes brought about in the Consolidated Appropriations Act of 2021.

Sources: 
SBA
Consolidated Appropriations Act of 2021