A change to the loan limit and funding formula for the Economic Injury Disaster Loan (EIDL) program created by the CARES Act could leave Realtors out in the cold, according to the National Association of Realtors (NAR).
When Congress passed the CARES Act by unanimous consent two weeks ago, $10 billion was set aside for EIDL. EIDL, according to NAR, was created to provide a maximum of $2 million to each applicant to ensure working capital is accessible during the current disaster the country is facing.
But just two weeks after the passage of the CARES Act, the U.S. Small Business Administration (SBA) said that EIDL loans would be capped at just $15,000 with a maximum advance amount of $1,000 per employee, according to NAR.
It’s a move that would particularly impact real estate agents, most of whom are independent contractors and have little or no employees.
“This sharp departure from CARES Act language is meant to expand access to the program, but it completely alters the nature of the loan and the advance grant, dramatically reducing effectiveness for businesses in need,” NAR President Vince Malta wrote in a letter to congressional leaders. “Especially impacted by this change are independent contractors who have no employees and whose EDIL grants are essentially rendered unforgivable.”
Tying EIDL advances to employee numbers bears no relation to the purpose of the loan; although these funds can be used for payroll costs, they are not explicitly tied to maintaining employee numbers or payroll levels — as is the PPP,” Malta added. “Reducing the loan limit from $2 million to $15,000 is particularly devastating to businesses that have been shut down for a month and have no way of knowing when they will be able to reopen.”
A spokesperson for NAR said the association heard about the changes from multiple members and also heard from multiple sources that loan counselors were telling applicants about the changes on Friday, April 10.
The Massachusetts SBA office announced the change but has since deleted the link, according to the spokesperson.
The SBA’s own website echoes the change, however, stating, “In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid.”
The letter calls on Congress to provide more funding for EIDL and the Paycheck Protection Program (PPP), which was also created with the goal of providing relief of small businesses, but faced early troubles. Initially, $349 billion was set aside for PPP.
“High-demand for these programs has strained the SBA and its lenders, raising legitimate concerns that necessary funding will quickly become depleted,” NAR leaders wrote in the letter. “In addition, many SBA lenders are turning away PPP applicants without existing business accounts.”
“This has left countless businesses and independent contractors unable to access funding, which within one week of opening was already nearly one-third committed,” the letter continues. “We strongly urge you to provide additional funding for the PPP and EIDL programs in future COVID-19 response legislation, ensuring the need for these loans is met as this crisis continues.”