EIDL Now: Boom or Bluster?

Good news: On September 7th, 2021, the U.S. Small Business Administration announced the COVID EIDL cap will increase from $500,000 to $2,000,000.  Even more, the cap for a single corporation will increase to $10.0 million. Though you can apply for a COVID EIDL loan of more than $500k today, any decisions on funding will occur after October 8th, 2021, or within 45 days (1.5 months) of the submitted application.  

The EIDL program signifies the largest redistribution of wealth since the early 2000s. Some small business owners who could not get a first look of their loan application by a traditional lender are now receiving $500,000 within weeks. This program gives business owners an opportunity to expand and diversify their models. These funds, if used responsibly, are helping individual borrowers and organizations to meet new opportunities in the marketplace and compete well. Since early 2020, Loan Mantra has enabled numerous success stories. We know firsthand how EIDL funds have changed the personal and professional trajectory of many deserving business owners.

Yet, now the stakes are far higher. This is a time for prudence and responsibility. As of now, SBA has no stringent criteria provided for a borrower to qualify for a $2.0 million loan.  It is imperative that a borrower ensures they can repay the loan once it becomes due.

What we know:

  • The rate of 3.75% (for profit business) and term of 30 years remains the same
  • Required credit score of 625 or greater 
  • Personal guarantee is required for all loans greater than $200,000
  • Liens on all business assets including real estate
  • Funds can be used for operating expenses (i.e., rent, payroll, debt payment & repayment, working capital, inventory, so on)

What we don’t know:

  • The criteria for approving loans greater than $500,000

How you can you prepare to apply, appeal or modify:

Based on experience, Loan Mantra recommends that borrowers prepare the following documents for appeal or modification (e.g, increase a request to $2.0 million):

  • 2019 and 2020 business tax return
  • Form 4506-T
  • Form 2202:  debt schedule
  • Personal Financial Statement
  • Form P-022: Standard Resolution
  • List of Real Estate owned
  • Driver’s license (color, front & back sides)
  • Voided check

Regular Loan Mantra users can e-sign and download most of these documents from their user portal.

Please note that some of these documents will be required via the EIDL portal, others will be  requested by a SBA loan processor.  Requests from the processor may come at any stage of the loan process until funds reach the  business’s bank account.

Items to note:

  • Approximately $100 Billion remains in the EIDL fund
  • The program is open until December 31st, 2021 or until funds are depleted
  • Since August, SBA has declined more than 60% of the initial applications received in April, May and June 2021
  • SBA promises to process EIDL loans for any funds < $500k in three weeks
  • SBA promises to process EIDL loans for any funds > $500k in six weeks
  • Our experience at Loan Mantra is that the SBA is processing everything in eight to twelve weeks
  • The borrower has a seven day window to respond to a SBA processor’s inquiry, following which the application is declined and the borrower must appeal

A final tip: The payment on a deferred loan of $2.0 million is approx. $10,200 each month or $122,000/annum. If you do participate in the EIDL program, ensure your business generates an EBITDA of more than $170,800. Cheap money in the short term becomes far too costly in the long-run if it’s not used with prudence.

We, at Loan Mantra®, are always here to help, work, and grow with you.