A federal loan program to provide restaurants and other small businesses with working capital during the pandemic will increase its loan limit to $ 500,000 and extend the term to 24 months starting April 6, the Small Business Administration said on Wednesday. (SBA) of the United States.
Economic Disaster Loans (EIDLs) are currently capped at $ 150,000 and are intended to cover current expenses over a six-month period. Restaurants and other businesses already eligible for a loan will automatically be upgraded to the most liberal terms, the SBA said.
The agency is already considering raising the cap to $ 2 million, an official told the Senate Committee on Small Business and Entrepreneurship.
The EIDL program has been largely eclipsed by the Paycheck Protection Program (PPP), a larger and more ambitious initiative that allows borrowers to have their loans canceled if the money is spent according to SBA guidelines. Both were created last year to help businesses survive the economic crisis of the pandemic.
EIDLs are direct loans with no possibility of remission. The program was created to keep small businesses operating during the pandemic by providing cash to cover most day-to-day expenses.
The program is only open to companies with less than 500 employees. The loans carry a fixed interest rate of 3.75% and a guarantee is required for loans over $ 25,000. Borrowers have up to 30 years to repay, depending on their agreement with a lender.
The change in loan terms marks one of the first actions of new SBA commissioner Isabel Guzman, who was sworn in on March 16.
“I was very disappointed when the Trump administration put the cap in place of $ 150,000 last year, so I’m grateful that Administrator Guzman is already working to increase the limit to the maximum of $ 2 million. dollars allowed by law, ”said Sen. Ben Cardin, D-Md., said in a statement. Cardin chairs the Senate Committee on Small Business and Entrepreneurship.