Expected Economic Injury Disaster Loan Program Changes to Benefit Gyms
Posted: August 27, 2021 in IHRSA
IHRSA: Success By Association
BOSTON, MA – We have some positive developments regarding the Small Business Administration’s (SBA) COVID-19 Economic Injury Disaster Loan (EIDL) program. IHRSA worked alongside health club owners and the SBA to make changes to the rules and requirements of the EIDL program which make it easier for businesses in the health and fitness industry to take advantage of the relief offered through the program. Though these changes have not yet been officially implemented by the SBA, we wanted to loop you in on the coming changes.
Liz Clark, President and CEO of IHRSA, was instrumental in IHRSA joining the American Hotel and Lodging Association, National Restaurant Association, International Franchise Association, Asian American Hotel Owners Association and the Coalition of Franchisee Associations in sending a letter to the Administrator of the SBA. This letter urges the SBA to make the changes effective as soon as possible, and highlights the need for these program changes, so businesses can get the relief that they so desperately need.
We’re still working hard to pass the GYMS Act—targeted federal relief for the health and fitness industry—but these EIDL revisions will help many gyms. So, here’s what you need to know about the SBA’s expected EIDL revisions.
- 1. The cap on how much you can borrow will increase.
- 2. You can use the funds towards additional expenses (e.g. paying off or down commercial debt and pre-paying principal and interest on federal debt).
- 3. The deferment period of the loan has increased to a full 24 months.
- 4. EIDL can be used to pay off higher interest loans.
Why the EIDL Program Needed Updating
The SBA designed the COVID-19 EIDL program to provide short-term economic relief— through low-interest loans—to small businesses which experienced temporary revenue loss due to the COVID-19 pandemic. However, to prevent exhausting the funds available through the program too quickly, borrowers were only eligible to receive up to $150,000. Thankfully, the initial concern over exhausting funding passed in April 2021, and the SBA increased the cap to $500,000.
This cap on available funds and other issues around the program’s application process caused many businesses in the health and fitness industry who needed economic relief to be unable to apply for or receive these loans.
The Small Business Administration recognized the issues that businesses in the fitness industry faced initially with COVID-19 EIDLs. Since then, the SBA has worked directly with IHRSA and owners and operators in the health and fitness industry to adapt the current program to be more accessible so more businesses can get the short-term economic relief they so desperately need.
What Changes Do We Expect the SBA to Make to the EIDL Program?
The largest change to the EIDL program that we expect to be announced is the latest cap increase. The maximum loan funds available to borrowers is expected to be expanded to $2,000,000.
The amount borrowers receive is calculated based on the extent of economic hardship which they suffered. However, this new maximum loan amount will allow struggling businesses to get the money they need to keep their doors open.
Additionally, we expect businesses to be able to use the loan funds to pay off or down commercial debt and pre-paying principal and interest on federal debt. Finally, the SBA is expected to increase the deferment period of the loans to a full 24 months.
Jeff Sanders, COO of Athletic Apex Health Clubs and Board Chair of the New York State Fitness Alliance, was key in working with the SBA. His expertise as a health club operator helped ensure the revised program would work for the health and fitness industry. Sanders is very optimistic about the coming changes.
“Our industry was one of the hardest hit and had the least amount of relief given to it. While EIDLs are debt it is one of the only lifelines for operators to grab a hold of while they are trying to survive,” says Sanders. “Increasing the maximum amount to $2 million and allowing operators to use it to pay other debt alone is going to help give a vehicle for refinancing some of the expensive debt that people were forced to pull out to try and survive while waiting for relief options.”
Sanders also believes the EIDL revisions will help thousands of locations survive long to receive the targeted relief we continue to fight for or until their businesses are profitable again.
While we must continue to push hard for further direct relief to the health and fitness industry, the revised EIDL program can provide much-needed short-term relief for struggling businesses.
Want to learn more? Check out our special IHRSA webinar featuring SBA representatives once the changes have been officially announced. A speaker from the SBA will cover the new EIDL program revisions and answer any questions attendees may have.