Small businesses hurt financially by COVID-19 can no longer take advantage of one federal aid program intended to dish out emergency cash, as billions in funding has run dry.
The Economic Injury Disaster Loan (EIDL) Advance program — which delivered this source of quick income for business — has stopped accepting new applicants, the Small Business Administration (SBA) announced in a weekend press release.
The program had been allocated $20 billion in funds by Congress through the CARES Act. It allowed small businesses, non-profits, and agricultural firms to apply for forgivable cash advances from the SBA in $1,000-per-employee increments. Businesses could request up to $10,000 in total from an EIDL Advance.
Because of their forgivable nature, these cash advances acted effectively as emergency grants issued by the government.
While advances can no longer be requested through the EIDL program, the SBA is still accepting EIDL loans for businesses impacted by COVID-19.
EIDL loans feature a 3.75% interest rate for small businesses and 2.75% for non-profits, as well as a 30-year maturity and an automatic one-year deferment before monthly payments begin.
In a written statement, SBA head Jovita Carranza said the advance program aided almost six million small businesses that collectively employed 30.5 million people.
Carranza added: “This program, built from the ground up in less than two weeks, assisted millions of small businesses, including non-profit organizations, sole proprietors and independent contractors, from a wide array of industries and business sectors.”
EIDL Advance Program’s Ending Arrives Amid Uncertainty
In April, the government doubled the war chest for emergency EIDL grants. This precedent means that it is possible the program may be brought back at some point in the future. However — at the current time — the SBA is not legally permitted to issue more funds through the EIDL Advance program.
It’s worth noting that this program had a rocky ride, despite any self-praise chimed by the SBA. Initially, the SBA was supposed to deliver funds to approved applicants within three days. However, in some cases, businesses owners had to wait weeks before the aid arrived as the deluge of applications overwhelmed the government agency.
With such a high demand for EIDL funds, the SBA began in early May to only allow applications from agricultural businesses. The program was then eventually reopened to a wider array of small businesses last month.
The EIDL’s latest stoppage comes at a crucial crossroad for the US during the coronavirus pandemic.
The New York Times recently reported that businesses are once again closing up shop while COVID-19 cases rise across the country. Meanwhile, the state of California just announced the rollback of its reopening plans, causing the closure of bars, indoor dining, gyms, and more.
With such uncertainty going forward, more and more businesses may struggle now that emergency funds from the EIDL Advance program are no longer available.
Still, small businesses can at least take advantage of EIDL loans. These loans allow eligible businesses to apply for up to $150,000 in funding. And, as mentioned above, they offer solid rates and repayment plans.
The government also just extended the Paycheck Protection Program (PPP) — another federal program meant to help cash-strapped small businesses — meaning that businesses can apply for aid to cover payroll until August 8.
Unlike the EIDL Advance program, there is plenty of PPP funding available — $130 billion in funds remained at the end of June. Lawmakers are also reportedly working on improving and tweaking the PPP (or whatever the next economic relief package may be) into the future.
Federal Funding: Where Else To Go
If your business is struggling financially due to COVID-19, learn how to apply for an EIDL loan. Applying for a PPP loan may also make sense for your business; check out Merchant Maverick’s article on the PPP basics to learn more.
Should your businesses have been denied EIDL or PPP funds, visit our article on how to find alternative funding routes.
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