The SBA recently announced an increase in funding available under the Economic Injury Disaster Loan Program, but making the decision about whether or not this is the right call for your business can be a difficult one.

Applying for a SBA Loan Approved, SBA Loan application form with a pen on a desk with an approved stamp

As of April 6, 2021 the loan limit for Covid-19 EIDL loans increased from 6 months of economic injury with a max loan amount of $150,000 to a further length of 24 months of economic injury with a maximum loan of $500,000. Prior to that point over 3.7 million businesses in the United States, that in total employed over 20 million people, found relief through the SBA’s Economic Injury Disaster Loans.

These provided critical working capital to help save these businesses. Many of these businesses and advocates have called on the SBA to remove the $150,000 cap. SBA communicated directly with those who had already taken out loans that still have eligibility under the new requirements.

Many of these businesses are facing weeks or even months long application periods so it is important to be prepared and to work specifically with a financial professional over the immediate and long term impact of this for your business. One of the biggest benefits of using the EIDL program is that these loans are issued directly by the SBA with a period of up to 30 years at an interest rate that cannot exceed 4%. Alongside the PPP, this created access to needed capital for many business owners.

Many users who are trying to take out the loan for the first time or those who are using the higher loan limits allowed under the increase program are reporting long turnaround times for their approval. A Reddit EIDL increase thread has tips, advice, and insight from hundreds of business owners waiting for relief in the form of EIDL.

How Are Individual Loan Amounts Determined?

The EIDL program determines individual loan amounts based on the projected revenue loss that an organization might suffer due to a disaster. The SBA has been reaching out to eligible small businesses under the targeted EIDL advanced program which provides further funds of up to $10,000. The application process currently uses an online application reviewed by the SBA which is followed up by a request for supplemental information.

Make sure that you understand that the EIDL application process deadline is December 31st, 2021. The initial application asks basic details about your organization after which point you will be provided an application number to use in all correspondence with the SBA. Your loan application number will be then associated with a follow up request on your online portal. If your loan gets approved, you will then need to complete all loan signing documents, and review all of the loan provisions.

One of the biggest benefits of using EIDL proceeds instead of PPP is that EIDL can be used for all types of working capital. If you are uncomfortable with the restrictions on the loan, think about all federal moneys you’ve already received and review whether there are any eligibility rules that could impact you before signing. Single audit requirements are associated with the EIDL for any organization that uses more than $750,000 in one year. While taking on additional debt might be the only way to save your business in these struggling times, it is an issue that should be taken seriously and be handled with the support of an experienced tax lawyer. A knowledgeable tax lawyer can help you navigate these complex situations and determine what’s best for you.