While Washington, D.C., tries to find a new equilibrium, millions of small businesses are still reeling from the pandemic's impact. One tool that could be back to work is a reignited EIDL program.
The Small Business Administration's Economic Injury Disaster Loan (EIDL) program provides loans directly made by the SBA to help businesses recover from a disaster. They are low-interest loans that are paid back over a long period and typically can be as high as $2 million, based on the size of the business and the disaster's scope. Each loan generally is underwritten on an individual basis.
When Covid-19 hit, the SBA had an overwhelming and daunting task to get money into the hands of tens of millions of businesses quickly. At first, the EIDL program ran in its traditional manner, though the program offered $10,000 in Advance grants. The SBA later adjusted the advances, allowing just $1,000 per employee up to $10,000.
In May, the SBA made the decision to cap loan amounts at $150,000 and change the underwriting process so that it became almost fully automated. Loans of $150,000 or less were popping into business owners' bank accounts within 48 hours of application. It was almost too good to be true. There are many claims of fraudulent loans, according to SBA's inspector general, Hannibal "Mike" Ware.
EIDL loans will continue to be available on a first-come, first-served basis until funding runs out. EIDL Advance loans are no longer available; the $20 billion allotted to the program ran out on July 11.
Let's give everyone the benefit of the doubt and assume that the best decisions were made at the time by the people in charge, tasked with a daunting challenge. But now, some months later, there are still millions of businesses in deep financial trouble. Some of these businesses got the maximum $150,000 amount and could have been eligible for a lot more if the program worked in its traditional manner.
Senator John Cornyn (R-Texas) has proposed a bill that would provide $100 billion to the EIDL program and $80 billion to the EIDL Advance program. While I agree with the need to provide more funding to the EIDL program, refunding the EIDL Advance program is not necessary at this point. I agree that the SBA should have to lift the $150,000 cap and restore the $2 million limit in addition to requiring the SBA to submit monthly reports to House and Senate committees to keep everyone 100 percent accountable. Restoring the old underwriting process will also aid in accountability and reduce fraud.
It isn't too late to consider reopening the EIDL program for businesses that still need help. Many businesses face dramatically lower revenue this year compared with last year and most of them have already exhausted their Paycheck Protection Program loans. Should the EIDL program open up again--as it was intended for loans up to $2 million--it could serve as a lifeline for many businesses.