March 18, 2022
This week features some good news for small business seeking to borrow funds to grow and operate — as well as for small businesses who have already borrowed (specifically, those who have EIDL loans). Read on!
Entrepreneurial Development Loan Fund (EDLF) terms have improved
Small businesses sometimes have difficulty obtaining bank loans because of a limited track record, limited collateral and liquidity, or sub-par credit history. Business Oregon’s Entrepreneurial Development Loan Fund exists to help fill this gap and enable Oregon small businesses to successfully launch and expand.
New legislation in 2022 has made the ELDF program even more attractive.
Maximum Loan Increased
Under new legislation in 2022, the maximum loan under this program has been from $250,000 to $1 million.
Borrowers must provide some of their own equity capital as follows: Fifteen percent of the amount of the project proceeds used for working capital and equipment; or ten percent of the amount of the project proceeds used to acquire real property.
Collateral must provided to secure the loan at a “loan to value” ratio (“LTV”) of 100% or provide for a collateral coverage ratio of 1:1. In the event of a collateral shortfall, the LTV of the proposed loan may be no more than 200% or provide for a collateral coverage ratio of at least 1:2 applying the following advance rates:
- Real property will generally be valued for collateral purposes at 80 percent of the tax assessed value or 90 percent of appraised value. Special-use or limited-use property may be further discounted;
- New construction will generally be valued for collateral purposes at no more than 90 percent of cost or 90 percent of the as-completed value, whichever is less, and may be further discounted for special-use or limited-use property;
- Existing machinery will generally be valued for collateral purposes at 70 percent of depreciated book value;
- Newly acquired machinery will generally be valued for collateral purposes at 60 percent of acquisition cost for new equipment and 75% of acquisition cost for used equipment.
- The value of property located or housed out-of-state will be significantly discounted from nominal assessed or appraised value.
Borrowers must prepare a business plan and have it reviewed by a Certified Entity (such as the SBDC). For more information about the program, visit this website.
EIDL loan repayment extended
From the Journal of Accountancy (Read original story.)
The US Small Business Administration (SBA) has extended the deferment period for COVID-19 Economic Injury Disaster Loan (EIDL) payments for the third time in 12 months.
In a news release, the SBA said that small businesses and not-for-profits that received EIDL funds do not have to begin payments on the loan until 30 months after the date of the note. Interest will continue to accrue on the loans during the deferment period. EIDL borrowers can make early payments on their loans.
The announcement Tuesday came exactly one year after the SBA had lengthened the deferral period from 12 months to either 18 months for loans made in 2021 or 24 months for loans made in 2020. In September, the SBA unveiled several major modifications to the program, including an extension of the deferral period for 2021 EIDL payments to 24 months as part of a series of major modifications designed to broaden the appeal of the program.
The EIDL program has allocated more than $351 billion for low-interest loans to 3.9 million small businesses and not-for-profits. The loans have a 30-year maturity with interest rates of 3.75% for small businesses, including sole proprietors and independent contractors, and 2.75% for not-for-profits.
Recipients can use the funds for any normal operating expenses and working capital, including meeting payroll, purchasing equipment, and paying debt. Funds also can be used to prepay commercial debt and make payments on federal business debt.
NOTE: Noah Brockman, of the Oregon SBDC Network’s Capital Access Team, encourages businesses that wish to take advantage of the new 30-month payment start date to reach out to their lenders. Otherwise, previously scheduled preauthorized payments will begin as originally set up.
To discuss this with an SBDC advisor, email your existing advisor or call us at 541-994-4166 to schedule an appointment. (For business owners who have not yet taken advantage of the SBDC’s no-cost business advising, register for advising here, and an advisor will be in touch shortly to schedule a meeting, in person or via Zoom or phone.)