The U.S. Small Business Administration has revamped its pandemic-specific Economic Injury Disaster Loan (EIDL) program to further support companies struggling from the effects of COVID-19.
Updates to the EIDL program include an increase of the loan cap from $500,000 to $2 million, the addition of a two-year repayment deferral period, an expansion of eligible uses for funds, and the creation of a 30-day exclusivity window to approve and disburse loans smaller than $500,000 to focus on the smallest businesses, according to a Brewers Association (BA) blog post.
“The Economic Injury Disaster Loans, at the beginning of COVID, is something that we were advocating strongly for,” BA director of federal affairs Katie Marisic told Brewbound. “[Paycheck Protection Program] PPP came into existence, a second round of PPP came into existence, the Restaurant Revitalization Fund came into existence.
“All of those things — because they were forgivable, or grants — took a lot of precedence over loans,” she continued. “That doesn’t mean that the loans weren’t important. Obviously, these are made for times of emergency, and we also advocated for you to be allowed to have both.”
EIDL interest rates are 3.75% for businesses and 2.75% for non-profit organizations for 30-year loans. The loan program has typically been offered to companies that have lost business due to circumstances beyond their control, such as natural disasters.
According to an update from the SBA published on September 8, loans may now be used toward “working capital to make regular payments for operating expenses, including payroll, rent/mortgage, utilities, and other ordinary business expenses, and to pay business debt incurred at any time (past, present or future).”
“Now, you are able to use the funds to pre-pay commercial debt, both principal and interest, but you can also make payments on federal business debt,” Marisic said. “If you had an SBIC or an SBA loan separate from this, you could pay that down using the money. Depending on what the interest rates are, it might be beneficial to some people.
“Brewing is an intensely high capital business and our members have tons of loans already,” she continued. “You’re always looking for ways to do the forgivable loans or grants, but there are alternatives out there if your needs are not being met.”
The SBA is accepting applications for loans of $500,000 or smaller exclusively until October 8, when applications for larger loans will be processed. Payments on all SBA COVID-19 loans will be deferred for two years.
“Interest does accrue at that time, but it’s something that hopefully will give people time as they’re working on getting back on their feet,” Marisic said.
At the onset of the pandemic, EIDL offered $10,000 advance grants. Recipients of those grants that also received PPP funding initially had the $10,000 deducted from the forgivable portion of their PPP loans, but that practice was eliminated, Marisic said.
The BA is also advocating for Congressional support of other COVID-19 relief programs, including the Restaurant Revitalization Fund Replenishment Act (H.R. 3807 and S.2091), which would add $60 billion to the now depleted fund.
“When the initial program started,there were 372,000 applicants who requested about $76 billion,” Marisic said.
The fund was created with $28.6 billion, and about 3,000 businesses were approved for loans but could not receive them because funds ran out, she said. Applications were accepted through May 24.
“We are continuing to advocate for it, the restaurants are continuing to advocate for it,” Marisic said. “We think that it’s really important that this gets replenished, because, as it is, there is still a need for funds.
“These businesses that qualified for the funds that applied for the fund should be able to access them,” she continued. “We think it is important to put everyone on even footing on that front.”
The BA estimates that its members received about $450 million from the first run of RRF grants, “a pretty significant amount for the industry, but there’s still more need out there, and we know that is important, and it’s a priority for the association,” Marisic said.
The pandemic’s persistence over the summer and into the fall, particularly due to the highly contagious delta variant, has dampened the outlook for on-premise recovery, compared to the late spring when the fund was accepting applications and reopening was more robust.
“I do not have a medical background or a virology background, but I think people were a lot more optimistic in May as to how things were going,” Marisic said. “So, I think what we’re seeing now is that there is a growing sense of urgency for more to be done about COVID relief, especially in hospitality.”
Both versions of the bill were introduced in their respective chambers of Congress in June. The House version was sponsored by Reps. Earl Blumenauer (D-OR) and Brian Fitzpatrick (R-PA) and has 220 co-sponsors (197 Democrats and 23 Republicans). It was referred to the House Committee on Small Business on June 11.
Sens. Kyrsten Sinema (D-AZ), Roger Wicker (R-MS), Chris Van Hollen (D-MD), Lisa Murkowski (R-AK), Tammy Baldwin (D-WI), Joni Ernst (R-IA), Debbie Stabenow (D-MI), Cindy Hyde-Smith (R-MS), Richard Durbin (D-IL) and Martin Heinrick (D-MN) are original sponsors of the bill in the Senate. Four Democrats and one Republican have signed on as co-sponsors. The bill was referred to the Senate Committee on Small Business and Entrepreneurship on June 16.
Only breweries with on-site hospitality models qualify for RRF grants, and the BA had to lobby for their inclusion in the program because “people don’t necessarily understand the business model as much and how we were impacted,” Marisic said.
“Now, I can tell you there’s probably a lot of congressional offices that can tell you the difference between a production brewery, a taproom brewery, a brewpub and how they were impacted during the pandemic,” she added. “Congress was great at working with us.”
The BA is also monitoring the progress of the Hospitality and Commerce Job Recovery Act (H.R. 1346 and S.477), which includes a provision for a one-time tax credit for 90% of the cost perishable inventory, such as food and beer, between March 14 and September 30, 2020.
“There was a lot of beer out in the marketplace when everything shut down,” Marisic said.
Both bills were introduced in February and have bipartisan support.