SBA Loans: Where the Program Stands Now
By now, many growing businesses in the U.S. are familiar with the EIDL. The federal government program is designed to support small businesses across the country and U.S. territories that are experiencing a temporary loss of revenue due to COVID-19.
Currently, the program is either almost or entirely out of funding from the government, according to reports from Vox and the Washington Post. The SBA published a statement on Wednesday explaining that if the EIDL program and others like it were to run out of money, it would have to stop accepting applications. (Since then, news coverage has focused mainly on the Paycheck Protection Program, another source of loans for small businesses that also came to a halt on Thursday.)
For more basic information on the EIDL, see “What is the SBA Economic Injury Disaster Loan program?” below. Here, we’ll cover what you need to know in light of this program’s recent pause.
What happens if I already filed an application for an SBA Economic Injury Disaster Loan but haven’t gotten money yet?
You’ll continue waiting for the SBA to process your application. The administration’s note says that “EIDL applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.”
However, the slow pace of the process has left many business owners wondering whether they’ll get their money at all. Information from the government validates their worries.
As of Wednesday, nearly four million businesses had applied for EIDL loans, an administration official told NBC. Those applications, if approved, would bring the total loan amount to $383 billion, far above the $17 billion Congress allocated for the program.
As with the Paycheck Protection Program, anecdotes abound of business owners who have filed EIDL applications but not yet received funds. This includes both the loans themselves and a cash advance the SBA originally promised to send business owners within three days of a successful application.
(The rules around these loans and advances changed shortly after the EIDL COVID-19 program launched: Last week, business owners reported the SBA told them that loans could total only up to $15,000, significantly less than the $2 million originally promised. And the advances, initially $10,000 for each applicant, were later capped based on a business’s number of employees.)
COVID Loan Tracker, a grassroots site which has been gathering stories from business owners, estimates that just 3% of applicants have received that cash advance.
In short, chances do not look good that you’ll soon receive an EIDL or advance if you haven’t already.
Can I file a new application for this loan right now?
Unfortunately, no. The SBA website links which formerly led to the application page currently redirect to the administration’s information page about its various types of loans.
Are there other loan and grant options for small businesses?
Yes. However, the federal government probably shouldn’t be your first stop, as its other major program is not faring well either. As noted above, the SBA also on Thursday stopped accepting applications for the Paycheck Protection Program.
We recommend consulting our rundown of all financial aid resources, including loans and grants from state and city governments, nonprofits and private companies. Unlike the EIDL and its counterpart, many of those are still up and running.
What is the SBA Economic Injury Disaster Loan program?
The program existed before coronavirus changed the financial landscape for businesses across the U.S. However, some of its details changed with the passage of The Coronavirus Aid, Relief and Economic Security (CARES) Act on March 27, and again later as demand for the loans put strain on the system.
When up and running, the program provides “small businesses,” or those with fewer than 500 employees, with working capital loans. These loans were initially to cover up to $2 million, but as of April 9, the SBA told numerous applicants the maximum amount would then be just $15,000 due to demand, reports the New York Times.
During the original application process, businesses could also apply for a $10,000 loan advance, which, if granted, they were set to receive within three days of a successful application, per the SBA. That didn’t happen, according to multiple reports. Firstly, the SBA changed the rules on April 6 such that companies can receive advances of only $1,000 per employee, up to $10,000 or 10 employees. Additionally, Sen. Rob Whittman confirmed in a tweet on April 8 that the process would take five days from the time an application is approved, though many businesses reported having waited much longer with no sign of cash. Unlike the working capital loans above, these advances do not have to be repaid.
Each of these loans “may be used to pay fixed debts, payroll, accounts payable and other costs but are not intended to replace lost sales or profits,” according to the SBA.
This post was originally posted on the NetSuite Blog. By Justin Biel, trends editor at Grow Wire.
Visit our NetSuite Learning Center to take advantage of educational whitepapers, eBooks, webinars and to stay up to date on the latest in NetSuite best practices.