The Washington Post today reported that the Small Business Administration (SBA) has quietly lowered the maximum loan available under their Economic Injury Disaster Loan (EIDL) program from $2 million to just $150,000. It is also announced it has ceased accepting any new loan applications.
This is bad news for many small businesses still waiting to hear whether loan applications were received, let alone processed. We’ll share results of a study conducted last week on how smaller ad agencies fared in applying for CARES Act Paycheck Protection Program (PPP) loans; but we can tell you that a number of agencies applied for EIDLs because the monies can be used across many business expenses, not restricted like the PPP to covering employee payroll and benefits.
Disaster Loan Unreadiness
The SBA backlog of loan applications swelled to unmanageable levels when funding for both the EIDL and PPP ran out in late April. Both programs were refunded by Congress by the end of that month, but financial experts warned the monies apportioned were far too low as demand for assistance remains high.
Republicans in Congress had pushed to allow farms and agricultural businesses to apply through the EIDL, and the SBA website now states that agricultural businesses are receiving priority application processing.
The SBA Office of Disaster Assistance is notoriously slow-moving. The Government Accountability Office (GAO) did a study in 2014 that found it took the agency an average of 38 days to process loans, far overshooting the 21-day turnaround goal for Hurricane Sandy relief. The GAO warned then that the SBA’s failure to upgrade and prepare for future disasters could “hurt its readiness” to assist applicants.
Funding and legislation apportioned in 2008 aimed at updating the SBA’s emergency response times and aging E-Tran application system was never applied. A promised new system called SBA One was apparently not completed; it is the E-Tran system that has crashed repeatedly under the surge in demand due to COVID-19 shutdowns. To make matters worse, the SBA suffered an EIDL data breach exposing the information of more than 8,000 businesses online.
Congress is also concerned that the SBA will not disclose data on loans and applications made under emergency funding legislation. Applicants have no way of finding out the status of their applications, and the Senate Committee on Small Business and Entrepreneurship is having difficulty getting information on how loan applications are being processed.
Stay tuned as we continue to push through the economic upheaval of the pandemic crisis. In the meantime, there are other resources available through State assistance programs. The team at Gusto, a payroll and benefits management firm, are maintaining a shared spreadsheet of small business resources on Google docs. Check it out. We’ll keep seeking resources that may help your agencies.
We wish you luck in locating the supports most helpful for your small business. Contact Second Wind for assistance or just to kick around ideas via the email contact form on our COVID-19 help page, or by calling 610-374-9093.