The use of funds was expanded to include the repayment and early repayment of non-federal corporate debt contracted at any time (past or future) and the repayment of federal debt. The U.S. Small Business Administration (SBA) has extended the COVID-19 Economic Injury Disaster Loan (EIDL) repayment period for the third time in 12 months. A borrower cannot receive a Paycheck Protection Plan loan in addition to an economic injury disaster loan (EIDL) through the SBA for the same purposes.
The SBA determines an appropriate installment payment based on the financial situation of each borrower, which, in turn, determines the term of the loan. For PPP loans where the lender's “Paycheck Protection Program” loan guarantee form included an amount for “Refinancing an eligible loan for economic injury disasters,” net of the down payment, PPP lenders are instructed to disburse and remit the loan proceeds used to refinance an EIDL loan directly to the SBA, not to the PPP borrower. The Notice clarifies that the amount of the EIDL loan to be refinanced does not include the amount of any EIDL advance received by the PPP borrower, since such advances do not need to be repaid. Businesses can qualify for these COVID-19 disaster loans regardless of whether they have suffered property damage, and they can use the funds to help cover their working capital needs and cover operating expenses as they recover from the impact of the pandemic.
As with all aspects of COVID-19, this is a fluid and rapidly changing environment, and applicants for SBA loans must follow developments closely. Instructions are provided on how to electronically submit EIDL refinance payments to the SBA, with a note that on the appropriate form, the EIDL loan number, not the PPP loan number, must be entered in the SBA Loan Number field. The loans have a 30-year maturity with interest rates of 3.75% for small businesses, including sole proprietors and independent contractors, and 2.75% for non-profit organizations. While SBA borrowers receive six-month debt relief, they can apply for a Paycheck Protection Program loan that provides capital to keep their employees on the job.
However, a borrower who has an EIDL loan not related to COVID-19 can apply for a PPP loan (with the option of refinancing the EIDL loan and converting it into a PPP loan). AICPA experts discuss the latest on COVID-19 EIDL and other programs to help small businesses during a virtual town hall held every two weeks. The Coronavirus Aid, Relief and Economic Security Act (CARES) expanded the Administration's long-standing Economic Injury Disaster Loan Program (EIDL). A borrower cannot receive a PPP loan in addition to an Economic Injury Disaster Loan (EIDL) through the SBA for the same purposes.
What remains to be seen is how quickly the SBA responds to what is sure to be an overwhelming number of applications for loans under this program.