U.S. House Small Business Committee Holds Hearing On Economic Injury Disaster Loan (EIDL) Program
Last Wednesday, the U.S. House Committee on Small Business met to discuss the Economic Injury Disaster Loan (EIDL) Program.
The program was made available to small business, independent contractors, and certain nonprofits to provide financial assistance for harm caused by the coronavirus pandemic.
The hearing entitled “The Economic Injury Disaster Loan Program: A View from Main Street” offered members the opportunity to hear directly from EIDL applicants regarding the challenges they’ve faced with the program, allowing Committee Members to conduct proper oversight.
The Economic Injury Disaster Loan Program provides up to $2 million for working capital (including fixed debts, payroll, accounts payable, and other bills that cannot be paid because of the disaster’s impact) to help small businesses, small agricultural cooperatives, and most private, nonprofit organizations to meet their financial obligations and operating expenses that cannot be met as a direct result of the disaster (regardless if there has been physical damage to the business).
Substantial economic injury “is such that the business concern is unable to meet its obligations as they mature or to pay its ordinary and necessary operating expenses.” The loan can have a maturity of up to 30 years and an interest rate of four percent of less.
The Committee has heard from small businesses about their concerns and frustrations with the implementation of the EIDL and the main issues are:
— Lack of Information on status of application. SBA has not instituted a workable process to allow borrowers who have applied but not received funds to monitor the progress of their applications. Small businesses across the country are reporting significant problems determining where they stand in the queue and any attempts to communicate with SBA through the recommended channels are fruitless.
— Arbitrary policy changes and lack of communication. SBA reduced the maximum amount of the EIDL loans from $2 million to $150,000 per small business and limited the EIDL advances to $1,000 per employee. These arbitrary policy changes are inconsistent with the law and Congressional intent, and the changes were not communicated effectively and in a timely way to borrowers, SBA field offices, and Resource Partners.
— Slow processing and disbursement of loans despite additional resources. Congress intended the additional infusion of funds to be used to provide a quick turnaround of the loans to struggling small businesses. As of May 30, 2020, 707,613 loans, amounting to nearly $55.8 billion, have been disbursed.
— Lack of transparency, to date, Congress does not know how many applications are pending in SBA’s queue, how quickly SBA is processing these applications, and what the approval/denial rates are for the loans.
Click Here for a video of the hearing and for written testimony.