The Small Business Administration pushed back the deferment period for all its disaster loans, including the COVID-19 Economic Injury Disaster Loan (EIDL) program, until next year.
The SBA said last Friday that all disaster loans made in 2020, including COVID-19 EIDL, will have a first payment due date extended from 12 months until 24 months from the date of the note. Meanwhile, all SBA disaster loans made in 2021, including loans made under the EIDL program, will have a first payment due date extended from 12 months to 18 months from the date of the note.
The EIDL program was included in the CARES Act last March as a way to provide loans to small businesses to help them deal with the economic fallout from the coronavirus pandemic. While the $360 billion program didn’t receive as much attention as the Paycheck Protection Program, many businesses ended up applying for the EIDL program, especially since the funds could be used for general operating expenses, and not only for payroll and rent, as the PPP loans were intended to be. The program is still proving to be useful for small businesses, even though EIDL loans are not forgivable like PPP loans. (EIDL advances, a related program from the SBA, don’t need to be repaid and are now targeted at low-income communities.)
“Small businesses, private nonprofits and agricultural enterprises, including those self-employed individuals, contractors and gig workers, continue to navigate a very difficult economic environment due to the continued impacts of the coronavirus COVID-19 pandemic, as well as historic severe winter storms in 2020,” SBA acting administrator Tami Perrillo said in a statement Friday. “The COVID-19 EIDL program has assisted over 3.7 million of small businesses, including nonprofit organizations, sole proprietors and independent contractors, from a wide array of industries and business sectors, through this challenging time.”
The SBA has earlier deferred payment on many of the loans. Existing SBA disaster loans that were approved prior to 2020 in regular servicing status as of March 1, 2020, received an automatic deferment of principal and interest payments through Dec. 31, 2020. That initial deferment period was later extended through March 31, 2021.
Now the additional 12-month deferment of principal and interest payments will be automatically granted to those borrowers. They will then resume their regular payment schedule with the payment immediately preceding March 31, 2022, unless a borrower voluntarily continues to make payments while on deferment. The SBA noted that interest will continue to accrue on the outstanding balance of the loan throughout the duration of the deferment.
EIDL loans are offered at a 3.75 percent interest rate for small businesses and 2.75 percent interest rate for nonprofits, with a 30-year maturity on the loan. Borrowers can make full or partial payments if they choose.
As of mid-February, the SBA said it has approved over $200 billion in emergency funding in low-interest loans during the pandemic, and it’s continuing to approve over $500 million each week for the COVID-19 EIDL program.