September 10, 2021

SBA Modifies COVID-19 Small Business Disaster Loans to Support the Hardest-Hit Businesses

Holland & Knight Alert
Joel E. Roberson


  • The U.S. Small Business Administration (SBA) announced changes to its emergency loan programs intended to provide critical access to capital for the industries hardest hit by COVID-19, including restaurants, hotels, gyms and travel and tourism.
  • On Sept. 8, 2021, the SBA published a new Interim Final Rulemaking (IFR) that expanded the COVID-19 Economic Injury Disaster Loan (EIDL) program effective immediately through Dec. 31, 2021, or until funds run out.

The U.S. Small Business Administration (SBA) announced changes to its emergency loan programs intended to provide critical access to capital for the industries hardest hit by COVID-19. On Sept. 8, 2021, the SBA published a new Interim Final Rulemaking (IFR) expanding the COVID-19 Economic Injury Disaster Loan (EIDL) program. The IFR expansion became immediately effective for COVID-19 EIDLs between Sept. 8 and Dec. 31, 2021 – or until funds run out. The SBA made these changes to the COVID-19 EIDL program with the intent to support the small businesses continuing to be hardest hit by COVID-19, including restaurants, hotels, gyms and travel and tourism small businesses. The SBA has posted a summary of the changes to the COVID-19 EIDL program on its website.


The SBA is using its existing and newly created tools to address the economic needs of small businesses created by the COVID-19 pandemic. In the early stages of the pandemic and during the more severe lockdowns, the Paycheck Protection Program (PPP) and the COVID-19 EIDL program worked in tandem to provide relief to small businesses across the nation. Additionally, Congress enacted industry-specific relief programs for restaurants and live performance venues through the Restaurant Revitalization Fund (RRF) and Shuttered Venue Operators Grant (SVOG) program. The ability to file a new PPP forgivable loan application expired on May 31, 2021, and the program has now run out of funds.

The EIDL program is still funded, and the SBA continues to issue COVID-19 EIDLs to businesses facing impacts from the coronavirus. An applicant for a COVID-19 EIDL must show a "substantial economic injury" occurred as a result of the pandemic, unlike the prospective standard of the first round of PPP, which only required "current economic uncertainty" to make a loan necessary. The EIDL program defines "substantial economic injury" as a harm that results in the inability of a small business to 1) to meet its obligations as they mature, 2) pay its ordinary and necessary operating expenses and 3) market, produce or provide a product or service ordinarily marketed, produced or provided by the business concern. A small business with a substantial economic injury then needs to show the relationship of the harm to COVID-19.

Changes to the COVID-19 EIDL Program

A COVID-19 EIDL is a low-interest, fixed-rate loan with a term of up to 30 years. The fixed interest rate is 3.75 percent for small, for-profit businesses and 2.75 percent for nonprofit organizations. A COVID-19 EIDL is not required to assume a primary position if a borrower has existing debt. Unlike PPP loans, a COVID-19 EIDL is not forgivable. A business can receive both a PPP loan and a COVID-19 EIDL as long as the funds are not used for duplicative purposes.

Based on the changes made to the COVID-19 EIDL program, a borrower is eligible if it employs not more than 500 employees, meets the SBA size standard for its industry or has a North American Industry Classification System (NAICS) code for industries hardest hit by COVID-19 and employs not more than 500 employees per physical location as long as it (together with its affiliates) has no more than 20 locations. The SBA designed the hardest-hit industries as those with NAICS Codes beginning with:

  • 61 (Educational services)
  • 71 (Arts, entertainment and recreation, including fitness facilities)
  • 72 (Accommodation and food services)
  • 213 (Support activities for mining)
  • 315 (Apparel manufacturing)
  • 448 (Clothing and clothing accessories stores)
  • 451 (Sporting good, hobby, book and music stores)
  • 481 (Air transportation)
  • 485 (Transit and ground passenger transportation)
  • 487 (Scenic and sightseeing transportation)
  • 511 (Publishing industries (except internet))
  • 512 (Motion picture and sound recording industries)
  • 515 (Broadcasting (except internet))
  • 532 (Rental and leasing services)
  • 812 (Personal and laundry services)

The SBA also increased the maximum loan limit to $2 million per loan with an aggregate loan cap of $10 million per corporate group of COVID-19 EIDLs. From Sept. 8 to Oct. 8, the SBA will only accept COVID-19 EIDL applications for less than $500,000 in an effort to ensure the smallest businesses can access the program.

The COVID-19 EIDL funds can be used for:

  • Working capital, payroll, rent and maintenance
  • Normal operating expenses
  • Pre-payment of on any business debt (New)
  • Principal and interest payments toward federal debt (New)

Applications must be received by Dec. 31, 2021, or before funds run out, so interested borrowers should apply as soon as possible. The SBA states, "Given the changes in the COVID EIDL maximum loan amount, eligibility, and increased outreach to industries that have been particularly hard hit by the pandemic (for example, restaurants, hotels, gyms, travel and tourism), the SBA expects an increase in the number of applications submitted and average loan size."

Holland & Knight will continue to monitor changes to COVID-19 relief and update clients on these developments. If you have any questions, please contact the authors or another member of Holland & Knight's COVID-19 SBA Team.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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