A federal loan program intended to provide restaurants and other small businesses with working capital during the pandemic will raise its cap on loans to $500,000 and extend the term to 24 months starting April 6, the U.S. Small Business Administration (SBA) said Wednesday.
The Economic Injury Disaster Loans (EIDLs) are currently capped at $150,000 and are intended to cover routine expenses over a six-month stretch. Restaurants and other businesses that already qualified for a loan will automatically be upgraded to the more liberal terms, the SBA said.
The agency is already looking to bump the cap up to $2 million, an official told the Senate Committee on Small Business and Entrepreneurship.
The EIDL program has largely been overshadowed by the Paycheck Protection Program (PPP), a more extensive and ambitious initiative that allows borrowers to have their loans forgiven if the money is spent according to SBA guidelines. Both were created last year to help businesses survive the economic wallop of the pandemic.
The EIDLs are straight loans, with no possibility of forgiveness. The program was created to keep small businesses in operation during the pandemic by providing money to cover most ordinary expenses.
The program is open only to businesses with fewer than 500 employees. The loans carry a fixed interest rate of 3.75%, and collateral is required for loans over $25,000. Borrowers have up to 30 years to repay, depending on their deal with a lender.
The change in loan terms marks one of the first actions by the SBA’s new commissioner, Isabel Guzman, who was sworn into office on March 16.
“I was very disappointed when the Trump Administration implemented the $150,000 cap last year, so I am grateful that Administrator Guzman is already working to increase the limit to the maximum $2 million allowed by statute,’ Sen. Ben Cardin, D-Md., said in a statement. Cardin chairs the Senate Committee on Small Business and Entrepreneurship.
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