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New Enhancements to the PPP and EIDL Small Business Aid Programs

Joseph Most

3.30.21 | Client Alert

SBA Increases Maximum COVID-19 EIDL and Extends Measurement Period

On March 24, the Small Business Administration (SBA) announced that it was raising the maximum COVID-19 Economic Injury Disaster Loan (EIDL) amount and extending the measurement period. Starting on April 6, COVID-19 EIDL loans amounts can equal 24 months of Economic Injury with a cap at $500,0001. Previously, loan amounts could only cover 6 months of Economic Injury with a $150,000 cap.

As a refresher, in December 2020, Congress allocated $40 billion to the SBA to expand the EIDL program, which offers favorable terms including a 3.75% interest rate and one-year payment deferral option for eligible small businesses who suffered a substantial economic injury due to COVID-19. A small business may be eligible for the COVID-19 EIDL if it is unable to:

  1. Meet its obligations as they mature,
  2. Pay its ordinary and necessary operating expenses, or
  3. Market, produce, or provide a product or service ordinarily marketed, produced, or provided by the small business.

Additional favorable terms include a 30-year term and broad allowable use of proceeds2.

Loans that were approved prior to April 6, 2021 may be eligible for an increase to up to $500,000. Businesses that received a loan subject to the existing loan limit do not need to submit a request for an increase. Instead, the SBA will reach out direct via email on or around April 6, 2021 to provide further detail to eligible borrowers.

Applicants that accepted a loan for less than the full amount originally offered have up to 2 years after the date of the loan promissory note to request an increase in loan amount. Applicants may continue to request an increase after the application deadline of December 31, 2021.

Paycheck Protection Program (PPP) Application Deadline Extended

President Biden is expected to sign into law legislation which extends the due date for new PPP loan applications (first or second draw) to May 31st. Previously, the deadline was set to expire on March 31st, so this is a welcomed extension for potential applicants who need more time to fill out applications or consider eligibility. The law also allows for timely pending applications to be processed through June 30th. With more time to apply, we encourage small business owners and self-employed individuals to consider the most recent PPP updates which have been rather expansive; including more categories of eligible expenses, the ability to take out a 2nd loan and the election for self-employed individuals to calculate their loan amount using gross receipts instead of net income3.

As always, we will keep you informed of any updates or changes to the various COVID-19 relief programs available. If you have any questions, please contact your Berdon advisor.

This alert is for general information purposes only and is not intended, and should not be construed, as legal or tax advice.

1 Economic Injury is defined by the SBA as a change in the financial condition of a small business concern attributable to the effect of a specific disaster, resulting in the inability of the concern to meet its obligations as they mature, or to pay ordinary and necessary operating expenses.
2 COVID-19 Economic Injury Disaster Loan (EIDL): Key Facts and Figures
3 PPP 2.0 – Stimulus Bill Upgrades the Paycheck Protection Program and American Rescue Plan Provides New Relief Program for the Restaurant Industry