The United States Small Enterprise Administration (SBA) introduced main modifications to the COVID-19 Financial Damage Catastrophe Loans (EIDL) program, together with elevating the mortgage cap from $500,000 to $2 million and including enterprise debt funds to the checklist of the way companies can use the mortgage proceeds.
In a information launch issued late Thursday afternoon, the SBA stated it was implementing the modifications to make it simpler for the small enterprise communities nonetheless reeling from the pandemic, particularly hard-hit sectors resembling eating places, gyms, and motels, to entry the greater than $150 billion in funding accessible for loans.
The next key modifications have been introduced. All are efficient instantly:
Growing the COVID-19 EIDL cap from $500,000 to $2 million: Mortgage proceeds can be utilized for any regular working bills and dealing capital, together with assembly payroll, buying tools, and paying debt. COVID-19 EIDL funds at the moment are additionally eligible to prepay industrial debt and make funds on federal enterprise debt.
Implementation of a deferred fee interval: The SBA stated small enterprise homeowners is not going to have to start COVID-19 EIDL repayments till two years after mortgage origination. Funds are deferred for the primary two years (throughout which curiosity will accrue), and funds of principal and curiosity are revamped the remaining 28 years. The company beforehand had carried out an 18-month deferment interval for loans made throughout 2021.
Institution of a 30-day exclusivity window: To make sure Predominant Road companies have extra time to entry these funds, the SBA stated it’s implementing a 30-day exclusivity window of approving and disbursing funds for loans of $500,000 or much less. Approval and disbursement of loans over $500,000 will start after the 30-day interval.
Simplification of affiliation necessities: To ease the COVID-19 EIDL utility course of for small companies, the SBA established extra simplified affiliation necessities to imitate these of the $28.6 billion Restaurant Revitalization Fund.
The COVID-19 EIDL program, which runs by Dec. 31, affords 30-year loans with mounted rates of interest of three.75% for small companies, together with sole proprietors and unbiased contractors, and a couple of.75% for not-for-profits.
The SBA referenced the RRF in an interim final rule (IFR) printed Wednesday that gives particulars on lots of the modifications to the COVID-19 EIDL program. The IFR notes that whereas the RRF was appropriated $28.6 billion to supply as grants to the restaurant trade, this system acquired 278,304 purposes in search of greater than $72 billion in help, practically 3 times the quantity appropriated. Funding was rapidly exhausted, leaving 177,300 companies with out help — proof, the SBA stated, of unmet funding wants by companies in an financial system now coping with an upswing in COVID-19 infections associated to the Delta variant of the virus.
The IFR additionally expands COVID-19 EIDL eligibility from organizations with not more than 500 workers to companies within the hardest-hit industries which have 500 or fewer workers per bodily location, supplied the enterprise, along with its associates, has not more than 20 areas.
The brand new rule permits COVID-19 EIDL recipients to make use of mortgage proceeds to make debt funds together with month-to-month installments, deferred curiosity, and pre-payment on enterprise debt. The identical funds, aside from pre-payments, at the moment are permitted on loans from federal businesses (together with the SBA) and licensed Small Enterprise Funding Firms (SBICs).
COVID-19 EIDL recipients might use mortgage proceeds to pay debt incurred each earlier than and after submitting the mortgage utility. Beforehand, the funds might be used just for working capital wanted to maintain the enterprise till it may resume regular operations.
The SBA did add a brand new regulation limiting entities which are a part of a single company group to obtain a mixed whole of not more than $10 million in COVID-19 EIDL loans. For functions of this restrict, entities are a part of a single company group if they’re majority owned, immediately or not directly, by a typical mum or dad.
AICPA specialists talk about the newest on the COVID-19 EIDL and different small enterprise help applications throughout a digital city corridor held each different week. The webcasts, which offer CPE credit score, are free to AICPA members and $39 for nonmembers. Go to the AICPA Town Hall Series webpage for extra data and to register. Recordings of City Halls can be found to view totally free on AICPA TV.
The AICPA’s Paycheck Protection Program (PPP) resources page homes assets and instruments produced by the AICPA to assist deal with the financial influence of the coronavirus.
For extra information and reporting on the coronavirus and the way CPAs can deal with challenges associated to the outbreak, go to the JofA‘s coronavirus resources page or subscribe to our email alerts for breaking PPP information.
— Jeff Drew ([email protected]) is a JofA senior editor.
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