Federal disaster loans for small businesses, farms and nonprofits trying to survive the coronavirus pandemic have been reduced from a maximum of $2 million per applicant to $150,000, sources said.
The change in the Economic Injury Disaster Loan program, or EIDL, was made by the U.S. Small Business Administration after it received more than 5 million loan applications in a couple of weeks in April, said two sources familiar with SBA’s decision but who aren't authorized to speak publicly.
Members of Congress, including New York Sen. Chuck Schumer, are calling on SBA to restore the maximum EIDL amount to $2 million because it’s stipulated in federal law.
The EIDL reduction is “completely disregarding current law and Congress’ clear intent that, in accordance with the CARES Act, small businesses be allowed to borrow up to $2 million to respond to the COVID-19 pandemic,” Schumer and two other Senate Democrats said in a May 9 letter to SBA administrator Jovita Carranza.
The CARES Act was signed into law in March by President Donald Trump as the virus was spreading across the county. It provided additional money for EIDL and created the Paycheck Protection Program loans, which are made by banks and other private lenders.
SBA didn’t publicly announce the EIDL reduction, though the decision is believed to have been made in April or May. The reduction also isn’t disclosed on the EIDL information page at sba.gov. An agency spokeswoman in Washington didn’t respond to requests for comment this week.
The senators said SBA’s “unauthorized policy change” forces entrepreneurs “to turn elsewhere to obtain the assistance they need to keep their businesses running.”
The senators said, “SBA has no excuse for its stubborn refusal to communicate transparently with the public or with Congress, and for its complete disregard for Congressional intent in the delivery of this critical assistance.”
SBA made unilateral changes to the PPP, too, and Congress passed a bill, which Trump signed into law last month, reversing the changes.
The legislation voided regulations from SBA and the U.S. Department of Treasury requiring PPP borrowers to use at least 75% of the funds for payroll expenses to have the loan forgiven completely. Otherwise, borrowers had two years to repay the loan.
The disaster loans come with interest rates of 3.75% for small businesses and farms, and 2.75% for nonprofits. The term is up to 30 years.
SBA resumed taking EIDL loan applications last month after processing a backlog. The agency said Sunday it had stopped processing requests for EIDL Advance grants after $20 billion in grant funds were exhausted.
More than 2.2 million loans have been made, totaling about $135 billion, as of July 3. In New York State, there have been 175,840 loans, totaling $11.4 billion, according to SBA. Data for Long Island hasn’t been released.
A note to our community:
As a public service, this article is available for all. Newsday readers support our strong local journalism by subscribing. Please show you value this important work by becoming a subscriber now.SUBSCRIBE