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SBA Economic Injury Disaster Loans

Wednesday, April 1, 2020
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The CARES Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. In addition to the PPP, another option for small businesses is the SBA’s existing Economic Injury Disaster Loan (EIDL) Program, which was expanded by the CARES Act and provides for longer-term loans with favorable borrowing terms.

Companies in all 50 states, District of Columbia, and some U.S. territories are typically eligible for EDIL loans relating to economic injury caused by the COVID-19 pandemic, and will be available until Dec. 31, 2020.

Eligibility

The CARES Act expanded EIDL loan eligibility for the period between Jan. 31, 2020, and Dec.

31, 2020, to include:

  • Businesses with 500 or fewer employees
  • Sole proprietorships and independent contractors with or without employees
  • Private nonprofits and cooperatives
  • Tribal small business concerns and ESOPs with 500 or fewer employees

If your business meets the aforementioned requirements and your revenues have suffered substantial economic injury from COVID-19, your business is eligible no matter your line of business.

Terms of the Loan

The terms of an EIDL loan are outlined below:

  • The amount of an EIDL loan available to each borrower is the business’s actual economic injury as determined by the SBA, not to exceed $2 million.
  • EIDL loans under the CARES Act do not require personal guarantees for loans up to $200,000, but the SBA will take a collateral interest in your business’s assets to the extent available.
  • The interest rate on EIDL loans is 3.75% fixed for small businesses and 2.75% for nonprofits. EIDL loans have up to a 30-year term. Specific terms will be determined on a case-by-case basis, based upon each borrower’s ability to repay the loan.
  • EIDL loans may be used for payroll, debts and to pay obligations that cannot be met due to the pandemic.
  • Your business may be approved for an EIDL loan based on credit score alone, without being required to submit tax returns.

The CARES Act also permits applicants to request an advance of up to $10,000 which may be used to keep employees on payroll, to pay for sick leave, meet increased production costs, or pay business obligations. If you apply, the advance should be paid to your business within three days. This advance, available backdated from Jan.31, 2020 to Dec. 31, 2020, is not required to be repaid even if your application is denied. To access this advance, borrowers must first apply for an EIDL and then request the advance.

How to Apply for an SBA Economic Injury Disaster Loan

EIDL loans are available directly from the SBA. They have introduced a streamlined application process, which you can access here. Additionally, SBA resource partners are available to help guide you through the EIDL application process. You can find the nearest Small Business Development Center (SBDC), Women’s Business Center, or SCORE mentorship chapter here.

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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