A guide to the SBA’s Economic Injury Disaster Loan

While the Small Business Administration extended the deadline to apply for the Paycheck Protection Program from June 30 to August 8, there’s another option for small business owners in need of financial resources due to the coronavirus pandemic: the SBA Economic Injury Disaster Loan (EIDL). 

The EIDL program reopened on June 15 and is now accepting applications. The program was modified by the federal CARES Act to make it easier for small businesses to qualify for the funding. 

In this article we’ll cover what exactly the loan is and who’s eligible. We’ll also walk you through the application process and what you can expect after submitting your request. 

What is an EIDL? 

The SBA’s Economic Injury Disaster Loan (EIDL) Program provides funding in the form of loans with low interest rates to small businesses that are experiencing temporary financial losses due to a disaster. Thanks to the CARES Act, it’s now easier for small businesses to qualify for the loan. 

The maximum amount businesses can apply for is $2 million. The amount you receive is based on the level of “economic injury” sustained by your business due to the coronavirus pandemic. This essentially means how much money your business lost. 

The interest rates are currently 3.75% for small businesses, and nonprofits see an interest rate of 2.75%. The repayment terms vary based on what you can afford, but the maximum term is 30 years. 

Important note: The SBA initially offered advances on the loan of up to $10,000, but announced on July 11 that the program would be discontinued.

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Who’s eligible for an EIDL? 

As long as you operate in a declared disaster area (which is all 50 states at this time), you are eligible for an EIDL. Still, there are a few more aspects to know about qualifying for the loan. 

  • Your credit score must be considered “acceptable” to the SBA. There isn’t any information on what an “acceptable” credit score is, but even if your business credit score is low, the SBA will also consider rent payment history, insurance, and other payment history. 
  • There is no personal guarantee required for loans under $200,000, and there is no collateral required for loans of $25,000 or less. 
  • You don’t have to prove that you don’t have other options for credit outside of your EIDL. 
  • You can apply for the EIDL, even if you already have outstanding SBA loans. This includes a Paycheck Protection Program loan. More on that later. 

What can I use my EIDL for? 

You can use your loan to pay bills, fixed debts, payroll, and accounts payable. However, you cannot use the money to expand your business or pay long-term debts. You also cannot use to the loan for: 

  • Employee bonuses 
  • Owner disbursements– unless for service performance
  • Stockholder/principal loan repayment
  • Fixed asset purchases 
  • Facility expansion or relocation 
  • Federal agency or SBA loan debt — except for IRS obligations
  • Long-term debt refinancing 

How do I apply? 

You apply for the EIDL through the SBA, which you can do until Dec. 16, 2020 (in some states, Dec. 21) by visiting their Disaster Loan Assistance page. The application process is streamlined, and according to the SBA, should take two hours and ten minutes or less. 

You’ll begin your application with a Disclosure section stating that the information you provide will determine your eligibility. It warns you that if you don’t provide the required information, your application won’t be processed. 

The next section, Business Information, requires you to provide your income statement as of January 31, 2020. You only need to fill out the sections marked with a red star, the rest are not required. 

In the Business Owners Information section, you’ll need to indicate whether or not another business fully owns your business. If this is the case, be prepared to provide information on business owners with at least a 20% stake, including: 

  • Birthdates
  • Birthplaces
  • Social Security Numbers 
  • Citizenship status
  • Address 

Next, you’ll fill out the Additional Information section. If any owners have a history of criminal charges, you’ll need to provide that information here. Then you’ll submit your application. 

Important note: Make sure your bank information is correct so you can receive the direct deposit. 

The SBA will assign a loan officer to you after you submit your application. If you’re speedy with responses to their questions, your loan will be processed quicker. 

Can I have both an EIDL and PPP loan?

Yes. As mentioned earlier, you can apply for both of the programs the SBA offers. However, you cannot use the different funding sources to pay for the same expenses. For example, you can’t use EIDL funds for payroll if your PPP loan is strictly used for payroll as well. 

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