Without any public notice, a federal disaster business loan program has been capped at $ 150,000 and limited to farmers and farm businesses, according to The Washington Post.
The Small Business Administration (SBA) Economic Disaster Lending (EIDL) program, once a source of emergency funding, is beyond the reach of small and medium-sized enterprises (SMEs).
EIDL was seen as a lifeline for startups since the coronavirus pandemic started months ago. Under previous SBA rules, eligible applicants could borrow up to $ 2 million in loans at an interest rate of 3.75%, according to the National Association of Grains and Animal Feed.
It is separated from the Paycheque Protection Program (PPP) and was an alternative for entrepreneurs grappling with the uncertainty surrounding loan cancellation, according to the report. The SMEs appreciated it because the loan amount did not depend on the number of employees.
Unlike PPP, which is run by private banks and regulated by the SBA to prevent SMEs from laying off employees and providing cash incentives to rehire workers, EIDL has been in place for years to deal with hurricanes, to tornadoes and forest fires, the Post reported. For example, this was part of the federal response to Hurricane Katrina in 2005, Hurricane Sandy in 2012, and the West Coast wildfires in 2019.
The SBA admitted it was facing a backlog of millions of applications for the disaster loan program for weeks. The Post reported that there was pressure on the SBA from Republicans on Capitol Hill to transfer loans to farmers and farm businesses.
“At this time, only applications from farm businesses will be accepted due to limitations in the availability of funds 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 loans, as well as $ 320 billion for PPP, $ 75 billion for hospitals and workers in the health and $ 25 billion for coronavirus testing.