The U.S. Small Business Administration is increasing the maximum amount small businesses and nonprofits can borrow through its COVID-19 Economic Injury Disaster Loan (EIDL) program, which provide low-interest emergency working capital to help save their businesses.
Starting the week of April 6, the SBA is raising the loan limit for the COVID-19 EIDL program from six months of economic injury with a maximum loan amount of US$150,000 to up to 24-months of economic injury with a maximum loan amount of US$500,000.
R.W. Baird analyst Michael Bellisario wrote on Wednesday that this development should financially benefit smaller hotel franchisees, particularly within Choice’s and Wyndham’s systems, adding that royalty fee collections are likely to increase and outstanding receivables are more likely to be paid. “Importantly, the health of the franchisee should improve following the favorable EIDL program changes,” Bellisario said. “According to Wyndham, 90% of U.S. franchisees received some type of government-sponsored financial aid last year. According to Choice, 90% of hotels qualify as small business owners, and over 70% of hotels applied or secured SBA loans through government programs.”
Businesses that receive a loan subject to the current limits do not need to submit a request for an increase at this time. The SBA will reach out directly via email and provide more details about how businesses can request an increase closer to the April 6 implementation date.
Any new loan applications and any loans in process when the new loan limits are implemented will automatically be considered for loans covering 24 months of economic injury up to a maximum of US$500,000.
This new relief builds on the SBA’s March 12 announcement that it would extend deferment periods for all disaster loans, including COVID-19 EIDLs, until 2022 to offer more time for businesses to build back.