Update on the Economic Injury Disaster Loan Program

The Small Business Administration’s Economic Injury Disaster Loan (EIDL) program has received emergency funding and been given expanded powers from the federal government in response to the coronavirus pandemic.

U.S. small business owners economically impacted by the coronavirus outbreak can apply for an EIDL directly from the SBA and receive working capital loans of up to $2 million. Applicants to the program can also receive a cash advance of up to $10,000 within three days of applying, which will be forgiven if they spend the proceeds on maintaining payroll, paid leave, increased costs, mortgage or lease payments, or other financial obligations.

The Economic Injury Disaster Loan program is an existing part of the SBA Disaster Loans arm. The SBA declared all U.S. states (and all counties within those states) and territories disaster areas, making essentially all U.S. small businesses eligible to apply for an EIDL.

The SBA recently updated the application process for applying for an EIDL related to the coronavirus pandemic on its website.

According to the SBA’s own estimates, it will take a little over two hours to complete the application.

You will need to verify your need for an EIDL as well as your eligibility. You will then need to fill out your business information as well as how you’ve been impacted by the coronavirus pandemic.

If you prefer, you can also download a paper application and mail it to the SBA. Additionally, you can call the SBA Customer Service Center (800-659-2955) or send an email to [email protected] to receive disaster loan information and an EIDL application.

If and when you’ve been approved for an EIDL, the SBA will inform you of the loan amount and terms you’ve qualified for—they’ll also send closing documents for you to sign. Once you’ve reviewed, signed, and returned the loan agreement, the SBA will send the funds via direct deposit in three to five business days.

Remember: Applicants can request an advance from the SBA, to be disbursed within three days of applying. Applicants won’t be required to repay that advance even if they are denied an EIDL.

The timeline for receiving a decision on your EIDL loan package varies. Generally, we’ve seen decisions within three-four weeks if you’ve provided all of your information accurately.

Eligible borrowers for an EIDL related to the coronavirus include:

• All SBA-qualified small businesses and cooperatives 500 or fewer employees
• Private nonprofit organizations
• ESOPs fewer than 500 employees
• Independent contractors
• Sole proprietorships
• Tribal businesses

“SBA-qualified small businesses” refers to the fact that businesses applying for this loan will be subject to review by the SBA concerning their credit score as well as financial need. Typically, SBA loan applicants need above-average personal credit to qualify for a loan.

Unlike other traditional SBA loans, there will be no “credit elsewhere” test for small businesses, meaning you do not need to prove you cannot receive funding through another source to be approved.

Businesses that are not eligible: Agricultural enterprises, religious organizations, charitable organizations, and gambling businesses.

The exact amount of your loan and the specifics of what you’ll need to qualify will depend on how your business has been affected and how much funding you qualify for. That being said, here are general terms and rates for these specific EIDLs:

• Loan amounts: As much as $2 million, based on actual economic injury determined by SBA
• Collateral: Required for loan amounts over $25,000
• Personal guarantee: Required for loan amounts over $200,000
• Interest rate: 3.75% for businesses, 2.75% for nonprofits
• Repayment terms: 30 years
• Automatic deferral of loan payments for all of 2020 and up to one year
• Uses: Working capital, inventory, equipment purchases, real estate payments, and other operating expenses (not intended to replace lost sales/profits or for business expansion)
• Grants through this program only available until 12/31/20

The Economic Injury Disaster Loan program has traditionally been used by businesses affected by natural disasters, such as hurricanes and floods. The extent to which the SBA and this program will be stretched due to the widespread nature of the coronavirus outbreak is unprecedented.

The federal government has authorized several rounds of additional funding to be allocated to the EIDL program. Most recently, the CARES Act directed an additional $10 billion in funding to the program. We expect more funding to be made available in subsequent stimulus and relief legislation.

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