On March 15, the U.S. Small Business Administration (SBA) announced an updated 30 month deferment of principal and interest payments on all existing COVID Economic Injury Disaster Loan (EIDL) program loans. The new deferment is automatic, effective immediately, and dates back to the inception of the approved loan.
More than $351 billion has been distributed through the COVID EIDL program to provide financial assistance for small businesses to help meet financial obligations and operating expenses that would have otherwise been met had the pandemic not occurred. While COVID restrictions are easing across the country, the SBA wants this additional flexibility to help small businesses in hard-hit industries and sectors being impacted by the disruption caused by new variants, supply chain obstacles, and inflation challenges.
It is best to speak with your CPA and business advisor to see if taking advantage of this deferment is the best decision for your overall business financial picture. Following are more details directly from SBA.gov:
Key information regarding EIDL deferment:
- This deferment extension is effective for all COVID-EIDL Loans approved in calendar years 2020, 2021, and 2022. Loans now have a total deferment of 30 months from the date of the Note. Interest will continue to accrue on the loans during the deferment.
- Borrowers may make partial or full payments during the deferment period but are not required to. The SBA recommends using www.pay.gov.
- The SBA will not send monthly SBA Form 1201 payment notices; however, the SBA will send regular payment reminders via email.
- Existing COVID EIDL Borrowers can find account balances and payment due dates in the SBA Capital Access Financial System (CAFS) and learn how to set up an account in the CAFS system by logging in at Capital Access Financial System (sba.gov).
- Deferments may result in balloon payments. The deferment will not stop any established Preauthorized Debit (PAD) or recurring payments on the loan. COVID-EIDL Borrowers with an SBA established PAD must contact their SBA servicing center to stop recurring payments during the extended deferment period. COVID-EIDL Borrowers who have established a PAD through Pay.Gov or any other bill pay service are responsible for terminating recurring payments during the extended deferment period.
- After the deferment period ends, COVID-EIDL Borrowers will be required to make regular principal and interest payments beginning 30 months from the date of the Note.
Key EIDL changes announced in September 2021:
- Increased COVID EIDL Cap. The SBA lifted the COVID EIDL cap from $500,000 to $2 million. Loan funds can be used for any normal operating expenses and working capital, including payroll, purchasing equipment, and paying off debt.
- Implementation of a Deferred Payment Period. The SBA ensured small business owners did not have to begin COVID EIDL repayment until two years after loan origination so that they could continue operating during the pandemic without having to worry about making ends meet.
- Establishment of a 30-Day Exclusivity Window. To ensure Main Street businesses have additional time to access these funds, the SBA implemented a 30-day exclusivity window of approving and disbursing funds for loans of $500,000 or less. Approval and disbursement of loans over $500,000 began after the 30-day period ended.
- Expansion of Eligible Use of Funds. The SBA allowed COVID EIDL funds to be used to prepay commercial debt and make payments on federal business debt.
- Simplification of affiliation requirements. To ease the COVID EIDL application process for small businesses, the SBA established simplified affiliation requirements to model those of the Restaurant Revitalization Fund (RRF).
(Source: SBA.gov)
View the SBA’s webpage for full details.
If you have any questions, feel free to consult with your Alloy Silverstein accountant and advisor.
