For Ocean and Monmouth County business owners that might still be in precarious financial situations, this could be an economic lifeline for your cash flow problems.
The EIDL has been discussed on our blog before, and then we discussed it again when the cap got bumped from 150k to 500k. I’m happy to tell you today that this program has been expanded once more to a whopping $2 million.
Keep in mind that even if you’re not expecting to get up to $2 million in funds, you should still take this seriously and move quickly to obtain the working capital that your business needs to function and flourish.
There’s more money, but there’s also more freedom to do what you’d like with it. What there is far less of is time. With the increased amount of resources available and the increased freedom regarding those resources, you’re going to find that this program is quickly devoured.
In this article I’m going to get into a quick review of what the EIDL is, what’s changed about the program, and what you can do today to get a piece of the action.
This is one of those times where I’m really hoping you put your plans on hold and get to work getting your application in. For two million, pretty much whatever you might have been doing can wait.
What is the EIDL, Again?
The EIDL is the Economic Injury Disaster Loan program. It was unveiled in March 2020 as part of the CARES Act. It started as a $150k loan, jumped to $500k, and is now up to $2 million. It’s intended to be a loan of last resort when businesses can’t get the working capital they need elsewhere.
What Are the Updates to the EIDL?
The biggest update to the EIDL is the cap increase to $2 million, but there are others as well. The EIDL can now be used to pay off commercial debt or some government backed/sponsored debt. There are also two years of deferred payments for borrowers.
The long and short of it is that the EIDL is giving more and asking less of borrowers.
In addition to the loan itself, there is the COVID EIDL Targeted Advance and Supplemental Advance grants for borrowers in low-income areas. Business owners in certain areas may find themselves eligible for extra funds that could become a grant. The requirements here are pretty strict: 50% or greater loss in a given 8-week period since March 8th, 2020, less than 10 employees, and being within the areas specified on the map I linked to above.
Check with the SBA themselves for an exhaustive list of all the changes to the EIDL. This PDF was actually incredibly clear, and not just by federal government standards either!
When Do I Need to Do Something About My EIDL Application?
If you’re expecting to borrow 500k or less, you need to start this process immediately. There is a month of time between September and October 8th during which the SBA will distribute funds to smaller businesses (less than 500k) before moving on to the larger loans.
I advise anyone thinking about borrowing (any amount) to move now. There’s no harm in being told you have to come back in a couple of weeks, and there’s always the chance that what you’re assuming your loan will be is incorrect.
“To be early is to be on time, to be on time is to be late, and to be late is unacceptable.”
What’s Stayed the Same With the EIDL?
The requirements behind taking and paying the loan back have largely remained the same. It’s still a 30-year, fixed-rate loan that is intended for business owners in financial distress that have no other means to obtain operating capital.
The interest rates for businesses is 3.75% fixed, while for private nonprofit organizations it will be 2.75% fixed.
The required credit score for loans less than 500k is 570, while loans over 500k require a credit score of 625.
The larger the loan, the increased likelihood you’ll need to offer collateral or a guarantor. That’s just common sense that most business owners would have expected anyway.
What Do I Need to Do to Apply for an EIDL Loan?
What if I Already Have an EIDL Loan?
Existing borrowers can login to their account. If for some reason you don’t already have one, you can create an account in the SBA Capital Access Financial System (CAFS) to monitor their loan status. Get account enrollment instructions here if you’re unclear on the process.
Thanks for Loaning Me Your Time
This loan could be a make or break situation for your business if you’ve been feeling the crunch of the labor shortage, reduced traffic, and the general stress and uncertainty that’s surrounded business operations for the last couple years.