SBA Raises COVID Disaster Loan Cap To $2 million, Makes Other Highly Anticipated Changes

Natalie Walters
The Dallas Morning News

WWR Article Summary (tl;dr) Improvements to the COVID EIDL program include a loan increase of up to $2 million, four times the previous limit of $500,000. 


Complaints about the U.S. Small Business Administration’s COVID-19 disaster loan program have made their way up the ladder and led to major changes, including boosting how much money business owners can get.

The agency announced significant updates to its Economic Injury Disaster Loan program, which provides low-interest loans to businesses that were hurt by the COVID-19 pandemic. It’s intended for companies with 500 or fewer employees.

COVID EIDL consultant Trevor Curran called the changes “amazing.”

Applicants realized early this week that they could suddenly request a loan increase of up to $2 million, four times the previous limit of $500,000. However, the SBA website still listed the old borrowing limit of $500,000. On Thursday, the agency confirmed raising the cap to $2 million.

Loans above $500,000 will undergo more scrutiny, requiring submission of a personal financial statement, a statement of property owned and collateral.

“The documents for the $2 million are onerous,” Curran said. “This money is not going to be easy to obtain.”

Curran, who runs Aurora Consulting in Connecticut with his partner, Linda Rey, said he’s submitted two business owner applications for $2 million this week.

One was for Joseph Putnam, whose collision repair shop in Danbury, Conn., received an SBA Paycheck Protection Program loan of approximately $200,000 last year while its EIDL application was denied.

Unlike EIDL loans, PPP loans were forgivable if a company met certain criteria.

The repair shop saw its revenue drop 50% in some months in 2020 because, with pandemic shutdowns, traffic and automobile accidents decreased.

“We shifted to doing repairs we wouldn’t normally do to stay alive,” Putnam said. “It was a letdown to have our EIDL application declined last year because we needed it badly.”

The second $2 million application was for Chris Baragar, who runs a South Carolina landscaping business that he said was “gravely impacted” by the pandemic. His business provides basic services like lawn maintenance and weed control but, during the pandemic, his higher-profiting services were seen as an unnecessary luxury.

His company saw about a 45% revenue decline between 2019 and 2020.

His application, submitted on Tuesday, is “in process,” the SBA site says. That’s because the SBA simultaneously announced it’s giving priority for 30 days to applications for $500,000 or less. That means it won’t start approving loans up to million until Oct.
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Curran said this prioritization was “critical.” While the SBA said it cleared a backlog of more than 600,000 applications for loan increases, it didn’t note how many reconsideration requests were stuck in processing. Applicants can request reconsideration for up to six months after being declined.

“SBA’s progress on reconsiderations has minimally and incrementally improved in recent weeks,” he said. “We are hopeful that this new prioritization of loans below $500,000 for the next 30 days will help clear this backlog.”

The reconsideration process has left many applicants describing the EIDL program as “nightmarish.” Many say they were declined for minor errors like misspellings but once a loan is rejected, there is no quick way to remedy it. Most end up waiting months in limbo, despite calls to the SBA or congressional offices for a second chance at business-saving funds.

California biotech firm AmerStem, which is focusing on producing saponins (soap-like molecules) for COVID-19 vaccines, had its first EIDL reconsideration request denied due to a simple error filling out the forms. The team learned Friday, after 20 weeks, that its request to increase its loan to $500,000 was approved. An SBA loan officer even told the company it was eligible to increase the loan to $1.7 million.

During the past 18 months, the company faced a “catastrophic” loss of a multi-year contract due to the closure of testing sites for the materials it produces. It survived on personal savings, retirement funds, funds from friends and family, as well as a $150,000 initial EIDL loan and an initial PPP loan of $250,000. It later received a second PPP loan of $309,000.

“It would be almost impossible to describe how much we suffered as a company and personally,” said co-founder Rocio Honigmann. “This increased EIDL is akin to handing a last tank of oxygen to a climber struggling on the last 20 feet before reaching the summit.”

The SBA, which declined an interview for this article, said it has put additional employees on the COVID EIDL program to speed up the process.

The agency also listened to feedback about the lack of directions for how to fill out the COVID EIDL application, which led many to make simple mistakes and denials. It also has an updated FAQ page.

“Our mission-driven SBA team has been working around the clock to make the loan review process as user-friendly as possible to ensure every entrepreneur who needs help can get the capital they need to reopen, recover and rebuild,” the SBA said in a statement.

Curran, who fills out COVID EIDL applications for 327 clients with Rey, said he noticed new dropdown menus, as well as an option to view each applicant’s maximum loan eligibility amount directly on the application. The max loan amount for each business is determined by using 2019 average monthly sales to calculate 24 months of injury. He also noted a comprehensive list of documents that the SBA may request during the approval process so that applicants can prepare them ahead of time.

Loan applicants now have information on every step of the process, Curran said. That includes detailed instructions on the “notorious” IRS Form 4506-T that applicants are required to fill out on their own, which has led to frequent mistakes.

“The overall experience for every EIDL applicant has improved 1,000% with the upgrade,” Curran said.

“Whether an applicant is first-time, or requesting an Increase of an existing loan, there are clear instructions.”

Distributed by Tribune Content Agency, LLC.

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