Businesses that took out a COVID Economic Injury Disaster Loan (EIDL) are once again getting a reprieve from repayment. The Small Business Administration is again extending deferment periods for disaster loans.
The SBA is allowing businesses who received disaster loans from the COVID-relief program to extend the deferment period for 30 months from when the loan was first approved, according to a news release. However, businesses seeking this deferment will still be required to pay interest, which is established at around 3 percent on the loans.
The loans have a 30-year maturity with interest rates of 3.75 percent for small businesses, including sole proprietors and independent contractors, and 2.75 percent for not-for-profits, Journal of Accountancy reported.
All EIDL loans approved since 2020 are eligible for the extension. This will help millions of small-business owners, Inc. reported.
The EIDL program has dispensed more than $351 billion worth of relief to nearly four million borrowers, according to the SBA.
EIDL loans differ from the Payroll Protection Program issued during the COVID-19 pandemic. They were issued to cover different type of company expenses. EIDL funds can be used for working capital and normal operating expenses, such as continuation of health care benefits, rent, utilities, fixed debt payments.
Recipients can use the funds for any normal operating expenses and working capital, including meeting payroll, purchasing equipment, and paying debt. Funds also can be used to prepay commercial debt and make payments on federal business debt.
The March 15 announcement by SBA Administrator Isabel Guzman came exactly one year after the SBA had extended the deferral period from 12 months to either 18 months for loans made in 2021 or 24 months for loans completed in 2020.
The announcement also came just days after a group of 16 senators sent a letter to the SBA seeking an extension. In their letter, the senators stressed that small businesses are still being faced with pandemic challenges that have not let up.
“Washington cannot mistake our signs of recovery for proof that small businesses have recovered from the pandemic,” Democratic Sen. Ben Cardin of Maryland, who chairs the Small Business and Entrepreneurship Committee in the Senate, said in praising the SBA’s decision to extend the deferment period. “Millions of small businesses, especially restaurants, bars, and other hard-hit sectors, are being sandwiched between past-due bills and increasing supply and labor costs.”