Interest rates on disaster loans for small businesses and nonprofits hit by the coronavirus would be slashed under proposed federal legislation.
The bill, introduced this week by Rep. Thomas Suozzi (D-Glen Cove), would lower rates on Economic Injury Disaster Loans, or EIDL, from 3.75% for businesses and 2.75% for nonprofits to 1% for both groups.
The lower rate would apply to loans made between mid-March and Dec. 31 by the U.S. Small Business Administration, or SBA, to help those impacted by the virus and shutdown of all nonessential activity to slow its spread.
More than 2 million EIDL loans have been made, totaling $127 billion as of Saturday. In New York State, there have been 160,285 loans, totaling $10.7 billion, according to SBA. Many borrowers also have received EIDL Advance grants of up to $10,000 per applicant.
“A rate of 3.75% for businesses isn’t attractive when commercial loans have lower rates,” Suozzi said. “These are economic disaster loans for people who’ve experienced an economic disaster; we need to make it more attractive for them to use this program to get back on their feet.”
Suozzi said he began looking at EIDL interest rates after speaking with Kevin J. O’Neill, managing director of the John W. Engeman Theater in Northport. Then Suozzi, along with other local House members and New York’s two senators, received a letter from the Long Island Association in June requesting that Congress lower the EIDL rates to match the 1% rate of Paycheck Protection Program loans.
"This is something that can get bipartisan support because it will have a real-life impact on businesses," Suozzi said.
He said Reps. Gregory Meeks (D-St. Albans), Kathleen Rice (D-Garden City), Lee Zeldin (R-Shirley) and Peter King (R-Seaford) have all signed on as sponsors of the bill. Suozzi said he now hopes to secure the support of New York State's other 21 House members.
There isn't yet a companion bill in the Senate, a Senate staffer said Wednesday.
King said, “Some people haven’t been able to make the PPP work for them and the EIDL could be of help, if we drop the interest rate. Businesses on Long Island really need this type of assistance. This could be their lifeline,” he said.
King also said he's written a letter to House Speaker Nancy Pelosi and Republican leader Kevin McCarthy asking that the EIDL interest-rate reduction be included in a future coronavirus relief package likely negotiated with the Senate.
EIDL loans are for up to $2 million with a 30-year term. Borrowers must have 500 or fewer employees.
The loan program has experienced problems, including a temporarily unsecure web portal. The program has previously helped homeowners and businesses to recover from natural disasters.
Long Island Association CEO Kevin Law said the local House delegation was correct in calling for an interest rate cut to a program that "is delivering vital economic support to help businesses devastated by the coronavirus.”
EIDL LOANS BY THE NUMBERS
Number of loans: 2 million
Total amount: $127 billion
NEW YORK STATE
Number of loans: 160,285
Total amount: $10.7 billion
SOURCE: U.S. Small Business Administration, data as of June 27