Schatz, Cortez Masto Introduce New Bill To Boost Funding, Lower Interest Rate For EIDL Program, Help More Small Businesses Access SBA Loans, Stay Operational During Pandemic
Legislation Lowers EIDL Interest Rate To 1%, Creates New Advance Of Up To $25,000; 2 Million Businesses Have Received EIDL Loans, 4 Million Have Received Advances During Pandemic
WASHINGTON – U.S. Senators Brian Schatz (D-Hawai‘i) and Catherine Cortez Masto (D-Nev.) today introduced new legislation that will help more small businesses access flexible Small Business Administration (SBA) funding to cover their operational costs and stay open. The legislation will make key updates to the economic injury disaster loan (EIDL) program, including cutting the interest rate to 1 percent, raising the cap on maximum loan amounts, and adding millions of dollars more to the program.
“Small businesses are still struggling during this crisis, but too many can’t access the federal relief programs that were created to help them,” said Senator Schatz. “We’ve heard from small businesses struggling to get a loan, so we’re making key changes to the EIDL program that will help employers get the funding they need to stay open.”
“The EIDL program has been an important lifeline for Nevada’s small businesses during the coronavirus pandemic, which is why I support this legislation to lower EIDL interest rates and make the program more flexible,” said Senator Cortez Masto. “If it’s easier for small businesses to secure these critical loans and grants, they can more easily adapt their businesses in light of changing times and take steps to protect public health and safety as they reopen. I’ll keep working with my colleagues to ensure Nevada’s small businesses have all the support they need during this pandemic.”
Along with the SBA’s Paycheck Protection Program (PPP), the EIDL program has been a crucial lifeline to small businesses during the COVID-19 outbreak. While PPP was intended to focus on paying employees and limited rent, mortgage, and utility payments, EIDL loans are more flexible and can be used to cover a wide-range of costs that cannot be paid due to the outbreak or other disasters. For many small businesses that were unable to find a lender to apply for PPP, the EIDL loan and advance have been their only source of financial relief.
SBA guidelines on the EIDL program have limited the usefulness of the program for the hardest hit businesses and nonprofits. Specifically, the interest rate for EIDL loans was set before the Federal Reserve lowered the benchmark interest rate to 0-0.25 percent, making the EIDL rates of 2.75 percent for non-profits and 3.75 percent for small businesses unnecessarily high. The SBA also imposed limits on both the maximum loan amount and advance amount, with loans size shrinking to 7.5 percent of the maximum allowed by law and advance amounts to 10 percent of the maximum. These reductions meant that many applicants have received far less than they need in order to survive this unprecedented economic disruption.
The Schatz-Cortez Masto bill will restore the value of the EIDL program for small businesses and nonprofits by:
- Lowering interest rates to 1 percent, in line with the PPP loan rate;
- Allowing new EIDL loan applicants to receive up to $2 million, based on their financial need;
- Enabling current EIDL loan recipients to request an increase in their EIDL loan up to $2 million, based on their financial need;
- Requiring the SBA to provide the full amount of the EIDL advance requested by an applicant, up to $10,000;
- Creating a new EIDL advance of up to $25,000 for applicants that have experienced a reduction of 50 percent or more in gross receipts from a comparable 8-week period before the public health crisis began; and
- Providing an additional $80 billion for EIDL loans and $20 billion for EIDL advances.
“Changing guidelines and lapsed funding left too many Hawaii Economic Injury Disaster Loans applicants confused, frustrated and unable to access this vital program at a time when they needed it most. The Small Business Disaster Loan Enhancement Act would address these issues by expanding funding, holding the SBA accountable to applicants and lowering repayment rates to match other loan programs. Small businesses will continue to need government support in the coming months, and we thank Senator Schatz for his steadfast leadership and support on behalf of Hawaii’s business community,” said Sherry Menor-McNamara, President & CEO, Chamber of Commerce Hawai‘i.