EIDL 2.0 News 2021 – Major Changes On How to Use SBA EIDL Loan Funds (Download EIDL FAQ)
The SBA has announced major changes to the EIDL loan program. A new $2 Million increase, new eligible expenses, extended deferral periods, and more. We discuss these changes in this video, plus provide a link to a very details SBA EIDL FAQ PDF that the SBA has published on their website.
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The SBA has announced major changes to the EiDL loan program. These changes have generated a lot of new questions concerning the EIDL loan. Now in this video, we’re going to go over the major changes that the SBA has announced towards the EIDL loan. And we’re going to show you a document and where you can find this document where the SBA answers most of the common questions that people have concerning the EIDL loan program. That’s what we’re going to talk about in this video.
Hello from Freedom Tax accounting, we’re an accounting firm where we have been providing quality tax and accounting services now for over 20 years. If you are new to this channel, we provide strategies for small business owners so they can achieve their financial goals. Although the last couple of months, we have been concentrating on providing content about the PPP and the EIDL loan program.
Now this video is being recorded on September 13 2021, we always emphasize the date on the recording on any video relating to the EIDL or the PPP, because these programs have been constantly changing. So, there may be things we discuss in this video that can change as soon as tomorrow. So that’s the importance of Subscribing to our Channel, that we are always up to date with the most accurate and important information concerning these SBA loans. Now also, we are going to provide a link to our website on the description of this video, if you want our contact information.
Okay. Now, last week that SBA announced major changes to the EIDL loan program, and a lot of people have a lot of questions we’re going to go over these major changes. And we’re also going to show you a document that was released by the SBA that basically answers most of the frequently asked questions that people have concerning the new changes of the EIDL Loan. Okay.
So, basically, you have to go to the SBA website, you go to the SBA homepage, and you scroll down, you click here where it says “EIDL”, you scroll down and see or it says here, “FAQ regarding COVID-19 EIDL” you click that, that’ll take you to this page, or you can download this PDF, and I’m going to put a link to this page on the description of this video, so, you can access it a lot quicker. Okay, so you download the document and this is the document that you get. I believe that all of you should download this document why there’s a lot of good information that you should know about the EIDL loan program. Basically, we have been providing consultations towards the ideal now for over a year. And I think that most of the most common questions that people ask us here at Freedom Tax, all of them are answered in this document. So, let’s go over some of the major changes that the SBA has done to the EIDL loan program. The biggest change is the maximum loan amount.
Now the max the EIDL has been increased to $2 million. Okay. Remember that in 2020, the EIDL loan had a max of $150,000. In early 2021, they increase that to $500,000. And now they are increasing it to $2 million. Now, if you want to apply for an EIDL loan that’s over $500,000 the SBA did say that they are going to start approving loans greater than $500,000 on October 8. So, basically from now to October 8, the SBA will be concentrating on loans that are under 500 $1,000.
Another change is the payment deferment period. Basically, the SBA is making the deferment period for two years. So basically, from the time you get the loan, you have two years to start making your monthly loan payments. Now, if you got your EIDL loan in 2020, in 2020, you already have a 24-month cover. deferment, period, but if you got your EIDL loan in 2021, the SBA had said that instead of 24 months, you had 18 months deferment period now that has changed.
Now, even if you got your EIDL loan in 2020, or in 2021, you do have the two-year deferment period. Now remember that the interest does accrue during that time. Very important to know also that there’s no penalty for prepayment. So, you can prepay your EIDL loan at any point, and there’s no penalty for prepayment. Once again, there’s a lot of good information in this document that you should download and read. It tells you where to apply for the loan. If you haven’t applied for a loan, it tells you how to apply for the increase. And there’s more details towards the bottom of this document.
But also see here that he says, “The SBA will begin approving loans greater than $500,000 on October 8”. Now, I think this is other than the increase to $2 million. I think this is the most impactful change done to the EIDL loan program. And it is how you can use the loans funds. In the past, the EIDL loan funds were not supposed to be used to pay preexisting business debt. Now as you can see here, it says that “the EIDL funds can now be used to pay or prepay business non federal debt incurred at any time, past or future, including; monthly payments, payments of deferred interest. And you can pay regularly scheduled payments on federal debt”.
Now, why is this big?
In our consultations, that we have done too many small business owners, these businesses in order to keep their business afloat, other than the ideal, they have other debt, they have credit card debt, they have other loans, and they could not use the EIDL loans funds to pay off those loans. Now you can and that’s huge because basically you can now refinance those loans do a better deal on a loan. For example, let’s say that you have a commercial vehicle, right and you have a $50,000 commercial vehicle loan is a five-year loan at 7% interest, now you can get the EIDL loan, pay off that that and instead of having a five-year loan at 7% interest, now you have a 30-year loan at three-point 75% interest on the ideal. So, this is very big, and I know that a lot of small business owners, since they are still struggling with their business due to COVID their credit card debt has been going up and in the past you could not use the EIDL to pay off your business credit cards. Now you can okay. So, this is very good change that I think is going to help a lot of small business owners at least get off the current debt that they have. And they can use the EIDL loans for a better interest rate and better loan terms, okay.
Other things have not changed. For example, you may not use the funds to expand your business, make prepayments on that that is owned by the federal agency, including the SBA, or the CBIC. Now you can use the AI do loan funds to pre-pay the EIDL loan. But if your business has another SBA loan, remember that the SBA has different types of loans, that’s the SBA has many loans, not just the EIDL loan. So, if your business has another type of SBA loan, then you cannot use that EIDL loan to make pre payments or pay off other SBA loans but you can make the monthly payments on those other loans from the EIDL. And also you cannot use the funds to start a new business. You need to use the funds for your current business operational expenses.
One of the most common questions we get is the EIDL loan forgivable? No, COVID EIDL the loan is not forgivable the loan that is forgivable is that PPP. Okay. Now once again, here it gives you information on collateral personal guarantee, this is a lot of good information that you should have. This is very important for loans that are $500, 000 or less, you need a minimum credit score of 570. If you want an EIDL loan greater than 500,000, the minimum credit score is going to be 625. Once again, their eligibility information here, you should download this document because it basically answers every question that you have.
I wanted to show you one of the most common questions that we get in our office is, “What happens if I got my EIDL loan denied?” Okay. This is another common question: “What is the deadline to file the application?” It says here that “The last day that applications may be approved is December 31. But be sure to file your application as soon as possible to allow processing time for approval”.
Now, there’s one section I really wanted to show you and it’s this one. Okay, what can I do if my application has been declined? Many of you have been having this EIDL loan declined and you don’t know how to proceed. The most important thing is that you do not file another application, you do have an application number and you have to go through a reconsideration process. This document details how you do your reconsideration process. Okay, so this document you should download it very good changes to the EIDL loan. Once again, we are going to provide a link to our website if you want our contact information, we are providing consultations on how to use the EIDL loan funds. Every business is different. Every business can use the funds in different ways. So, a lot of you want to make sure that you are using the EIDL loan funds in the correct manner so you don’t get into trouble with the federal government.
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