2020 loans start being due 24 months after the issue date.

2021 loans start being due18 months after the issue date.

On Friday, March 26, 2021, the SBA announced that all disaster loans—including COVID-19 Economic Injury Disaster Loan (EIDL) program loans that were made in 2020—will start being due 24 months from the date of the note instead of 12 months. SBA disaster loans made in 2021, including loans made under the EIDL program, will begin being due starting 18 months from the note’s date instead of 12 months.

CARES, EIDL, and PPP

The Coronavirus Aid, Relief, and Economic Security Act (CARES) act of March 2020 included the EIDL Economic Injury Disaster Loan (EIDL) program to provide loans to small businesses needing assistance as a result of the coronavirus pandemic. While the $360 billion EIDL program didn’t garner as much buzz as the Paycheck Protection Program (PPP), many companies applied for the EIDL since these funds could be used for general operating expenses while PPP loans were to be earmarked for payroll and rent.

Because of the greater latitude with fund usage, the EIDL loans are still something to consider, even though they are not forgivable like PPP loans. Note: There is a related program from the SBA—the EIDL advance. It is aimed at helping low-income communities and does not need to be repaid.

SBA Statement

SBA acting administrator Tami Perrillo said, “The COVID-19 EIDL program has assisted over 3.7 million small businesses, including nonprofit organizations, sole proprietors, and independent contractors, from a wide array of industries and business sectors, through this challenging time.”

Earlier, the SBA had delayed payment on disaster loans in regular servicing status as of March 1, 2020. That category received an automatic postponement of principal and interest payments through December 31, 2020. That December grace period was later pushed out to March 31, 2021.

Perrillo said, “Small businesses, private nonprofits, and agricultural enterprises, including those self-employed individuals, contractors, and gig workers, continue to navigate a challenging economic environment due to the continued impacts of the coronavirus COVID-19 pandemic, as well as historic severe winter storms.”

Should You Pay If You Can?

The deferment is automatic, and you don’t have to do anything to get it. So, you have an extra 12 months ( or six months if it’s a loan granted in 2021) to begin paying principal and interest payments. If you can afford to start paying before the deferment date, you might consider it. The SBA has stated that interest will continue to be assessed on the loan’s outstanding balance throughout the entire time of the postponement. The loan interest rates are low but should be taken into consideration.

Interest Rates and Emergency Funding

Small business EIDL loans are offered at a 3.75 percent interest rate, while nonprofits can obtain loans for a 2.75 percent interest rate with a 30-year maturity.  You can make full or partial payments, which gives you some flexibility and helps you manage your cash flow in these uncertain times.

The SBA has approved over $200 billion in emergency funding in low-interest loans through the pandemic duration. The agency continues to approve over $500 million each week to support the COVID 19 EIDL program.

Our Recommendation

The SBA EIDL loans have been helpful and kept many businesses open. The good news is that these loan proceeds did not have to be used for payroll or rent, as did the PPP loans. There is no indication at this time that the SBA EIDL loans will be forgiven. We suggest that you pay whatever your cash flow allows, but remember the interest on the EIDL loans will continue to accrue.

Call our offices if you have any questions.