The loan cap will be raised from $500,000 to $2 million, among other changes.
Owners and operators of small businesses, restaurants included, can breathe a little easier with the White House and SBA expected to soon announce a major overhaul to the Economic Injury Disaster Loan (EIDL) program.
Changes include increasing the loan cap and expanding the ways small business restaurants can use the funds. President Joe Biden will reportedly provide further details related to the overhaul in a speech Thursday.
UPDATE: Biden expands EIDL program, issues massive vaccine mandate
The news comes a little more than two weeks after The National Restaurant Association and other hospitality groups sent a letter to the SBA requesting the changes officials will now be putting into place.
Specifically, the loan cap will be raised from $500,000 to $2 million, and businesses that have already received a loan capped at the previous amount will be eligible to increase their loan to the max for which they are eligible.
Requirements for businesses that are looking to utilize the EIDL will now mirror the Restaurant Revitalization Fund, another request the Association made that the current administration is granting.
EIDL funds can now also be used to pre-pay business debt, meaning small business restaurants carrying higher-interest commercial debt, or credit card debt acquired over the last year, can now use EIDL funds to pay off that debt in one lump sum.
“At a time when there is still an extreme need for small business restaurants to access working capital, these changes will improve the outlook for thousands of operators and will lift the economic outlook for communities small and large,” Sean Kennedy, executive vice president of Public Policy for the Association, said in a statement. “We worked with the SBA to improve the terms and use of these federal loans so they could be more impactful. The changes we secured will provide an additional rebuilding tool at a time when operators are once again faced with uncertainty.”
With the Delta variant causing more concern among owners and operators, it’s no surprise that franchise owners were requesting more avenues of relief. Of the more than 350,000 restaurants that applied for assistance through the RRF, less than half (100,650) received financial assistance.
The soon-to-be announced overhaul will look to get more money in the accounts of restaurants that truly need assistance and ones that perhaps missed out on previous rounds of funding, for one reason or another.
Government loans like those provided through the EIDL program are more attractive to small business owners compared to traditional lines of credit supplied by banks for several reasons. The loans come with lower interest rates as well as a longer timeline to pay back the money, which means taking on this sort of debt is less risky than a loan with a traditional lender. They can also be easier to acquire at a time when some small businesses may not qualify for loans from the traditional lenders.
Small business owners who qualify will have until December 31, 2021 to apply for funds from the EIDL program as long as they are available. Owners who are looking to increase the amount of their loan will have until the same deadline.