In a recent blog I wrote about “COVID Recovery For Small Business.”  This blog was designed to help businesses strengthen their cash flow damaged by the pandemic.  The last item in that blog was “Check Out Government Loan Programs.”  This blog is to provide an update to the Small Business Administration’s Emergency Injury Disaster Loan Program.

The Emergency Injury Disaster Loan (EIDL) was first established in early 2020 in response to the COVID 19 pandemic.  The EIDL was designed to assist to small businesses and non-profits so they could supplement their cash flow to stay alive during the pandemic and the different shut-downs that were directed by government.   It is a low-interest loan from the Small Business Administration designed to assist business endure the pandemic.

Nobody expected that small businesses would still be facing cash flow issues due to the pandemic 18 months later.   However, because of the Delta variant, many businesses are still facing restrictions that continue to interfere with the business recovery.  Depending on what part of the country your business operates in, you could either be seeing a complete recovery or continued restrictions that are still pinching your cash flow.

Do I Really Need the Money?

If your business has a cash flow that has been negatively affected by the pandemic, this is a no-brainer.  This can bolster your business and you have two years before you have to start paying the loan back.  This will give you cash flow to get through the remainder of this pandemic.  A 3.75% rate is a low rate that you will not be able to access from a bank.

Even if you don’t use the money, you can pay it back in a couple years after your business recovers or the economy returns to normal.   It gives you another cushion just in case the unexpected happens.   The economy is experiencing all sorts of supply chain constraints and your business may run into one of these constraints.  Some of our clients are seeing delays in shipments from overseas which means they are having trouble delivering their goods, which will in turn delay any payment they receive from their customers.   The EIDL gives you the opportunity to supplement your cash flow if you hit an unexpected supply chain constraint or other surprise.

The payment on any EIDL is deferred for 2 years.  While interest accrues, the interest rate is 2.75% for non-profits and 3.75% for businesses.  This is a reasonable rate for the protection of your business and to afford your business opportunities that may avail themselves during this difficult time.  It may also allow you the capital to transform your business into a more flexible business.  Sometimes strategic transformation requires capital.  This is, of course, your call but it is an opportunity to protect your cash flow.

Changes to the EIDL Program

The cap on the loans has increased from $500,000 to $2 million.   These loans can be paid over 30 years.  As noted above, the payments on the EIDL are deferred for two years and interest will accrue during those two years.

The funds may be used for any operating expenses, including purchasing equipment and making payments on debt. This includes payroll, rent/mortgage, utilities and other ordinary business expenses, and to pay business debt incurred at any time past, present, or future. This includes loans owned by a federal agency, including SBA, or a small business investment company (SBIC) licensed under the Small Business Investment Act.

The SBA is committed to getting funds out quicker.  The SBA is implementing a 3-day exclusivity window to approve and disburse funds for loans of $500,000 or less.  This change is immediate.   The approval and disbursement of loans over $500,000 will go into effect starting October 8, 2021.

Finally, the SBA has made the intake process for the loan more simplified.  These model the $28.6 billion Restaurant Revitalization Fund (RRF).    There were much fewer problems with this fund than there were with the initial EIDL loan.  These changes are intended to make the process more friendly.

Collateral Requirements

There is no collateral needed for loans under $25,000. Collateral will be needed for any loans greater than that.

A personal guarantee is required for loans greater than $200,000.

Keep in mind that the SBA will do a credit check on your credit.  This could become an issue for individuals with a poor credit history.  The SBA website notes that you must have a credit score of at least 570 for loans under $500,000.   For loans greater than $500,000, you must have a credit score of 625.

Please note that these programs are continually under review and may have changed since this was written If you are interested in the EIDL, please go to this link for the latest information or contact me directly and I can help.

If you are in need of discussing your cash flow, please contact me directly at