EIDL program to focus on ag businesses
The Small Business Administration announced May 4 it has resumed processing Economic Injury Disaster Loan, or EIDL, applications. Additionally, SBA will begin accepting new EIDL and EIDL Advance applications on a limited basis.
At this time, only agricultural business applications will be accepted due to limitations in EIDL offers loans of up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. Loan proceeds can only be used for working capital necessary to enable the business to alleviate the specific economic injury and resume normal operations. Funds cannot be used to refinance long-term debt, make loan payments on other federal debts, repair physical damages, pay IRS tax penalties or pay out dividends.
Interest rates for loans are statutorily set at 4% per annum, but pandemic-related rates typically have been lower. These loans are offered with long-term repayments, up to a maximum of 30 years. Principal and interest payments can be deferred for up to one year. Collateral generally is required for loans over $25,000 if it is available, though SBA will not decline loans for a lack of collateral. While loan amounts may range up to $2 million, specific loans depend upon the amount of economic injury that a business has suffered. This amount is determined by SBA on a case-by-case basis after businesses apply.
As authorized by the Coronavirus Aid, Relief and Economic Security (CARES) Act, emergency EIDL advances are available within three days of applying to SBA. Advances can be used for several purposes, including providing paid sick leave, payroll, meeting production costs and paying rent or mortgages on business spaces. Businesses that use these funds for permissible pandemic-related costs will not have to pay back the advance they receive. While EIDL advances are capped at $10,000, SBA has further restricted them to a limit of $1,000 per employee.