Without any public notice, a federal business disaster loan program has been capped at $150,000 and limited to farmers and agriculture businesses, according to The Washington Post.
The Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) program, once an emergency source of funding, is out of reach for small- to medium-sized businesses (SMBs).
EIDL was seen as a lifeline for startups since the coronavirus pandemic began months ago. Under SBA's earlier rules, eligible applicants could borrow up to $2 million in loans at an interest rate of 3.75 percent, according to the National Grain and Feed Association.
It is separate from the Paycheck Protection Program (PPP) and was an alternative for entrepreneurs struggling with the uncertainty around loan forgiveness, the report said. SMBs liked it because the loan size did not depend on the number of employees.
Unlike the PPP, which is operated by private banks and regulated by the SBA to prevent SMBs from laying off employees and providing cash incentives to rehire workers, EIDL has been in place for years to deal with hurricanes, tornadoes and wildfires, the Post reported. For example, it was part of the federal response to Hurricane Katrina in 2005, Hurricane Sandy in 2012, and the West Coast wildfires in 2019.
The SBA acknowledged it faced a backlog of millions of applications for the disaster loan program for weeks. The Post reported there was pressure on the SBA from Capitol Hill Republicans to shift the loans to farmers and agriculture companies.
“At this time, only agricultural business applications will be accepted due to limitations in funding availability and the unprecedented submission of applications already received,” the SBA said in a statement, according to the Post.
EIDL ran out of funding last month, prompting Congress to provide an additional $50 billion for the loans, alongside $320 billion for the PPP, $75 billion for hospitals and healthcare workers, and $25 billion for coronavirus testing.