Economic Injury Disaster Loan

Overview

Summary

Low-interest loans of up to $2 million for businesses that have suffered losses from some kind of disaster. The loans are made directly by the S.B.A., and you can apply on it’s website. The loan cannot be used for the same purpose as the PPP. If you have an EIDL loan already, you can roll it into a new PPP loan.

Highlights:

  • Fast Funding

    Businesses can borrow up to $2M to fund payroll and operating expenses.

  • Great Terms

    No cost to apply. 3.75% interest for 30 years. Flexible terms for collateral and credit.

  • Easy Eligibility

    Small business or non-profit with less than 500 employees.

  • Easy Approval Process

    Apply at SBA.gov.

Am I

Eligible?

The SBA’s Economic Injury Disaster Loan provides vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic.

This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19

Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.

The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.

To be eligible for EIDL assistance, small businesses or private non-profit organizations with less than 500 employees must have sustained economic injury.

ELIGIBLE?

  • Sustained economic injury

  • 500 or less employees

How much can I

BORROW?

For these loans, you don’t request an amount. The S.B.A. will determine how much you can borrow using a formula intended to approximate six months of your operating expenses. To calculate that, the agency will generally subtract annual cost of goods sold from annual revenue and loan you up to half of that sum.

When will I get the

money?

  • The S.B.A. is supposed to disburse up to $10,000 — the portion that does not have to be repaid — within three days of receiving an application from an owner who self-certifies that he or she is eligible for the aid.
  • In normal times, it typically takes around two weeks for the S.B.A. to make a decision on a disaster loan application.
  • Up to a week after their decision for the loan check to be disbursed.

What can I use the

Money For?

The loans cannot be used to refinance previous loans; all other expenses are eligible. If you use money from a disaster loan to pay your employees, you can try to refinance through the Paycheck Protection Program, which allows for the loan to be forgiven. However, you cannot use the loan from PPP and EIDL for the same purposes like payroll for 8 weeks of PPP loan.

EIDL ELIGIBLE EXPENSES

The loans can be used for all expenses other than to refinance previous loans

Will this loan be

FORGIVEN?

Partly. Businesses can request up to $10,000 of a disaster loan as a grant. It’s described on the application as a “loan advance,” but S.B.A. officials confirmed that it did not have to be repaid. Borrowers will have to repay the rest of their loan amount.

What are the

TERMS?

What do I need to know about repayment?

  • The rest of the loan can be repaid on a term of up to 30 years.
  • The interest rate is 3.75 percent for small businesses and 2.75 percent for nonprofits.
  • No payment is due for the first year

Other Terms

  • No personal guarantee on loans of less than $200,000.
  • Business assets, like machinery and equipment, can be used to secure loans of up to $500,000.
  • Larger loans may require real estate — whether it’s your business’s or your own — if you have it. If you don’t, the agency said, it will not turn borrowers away because they lack collateral.

What will Lenders

Be Looking For?

What documents do I need to apply?

The online loan application is designed to be simple. You’ll need to know your business’s gross revenues and cost of goods sold for the 12 months that ended Jan. 31, 2020.

Sections on the application:

Disclosure

This section describes the loan and states that the information collected will be used to determine whether you are eligible. It includes a warning that if you do not provide all requested information, your loan will not be processed, as well as a reminder that the SBA is relying on your self-certification of eligibility to receive the advance (if you apply) and that there is a perjury penalty if you are not truthful. After verifying your eligibility on the Disclosure page, you will continue to a Business Information section.

Business Information

This section is the longest, and requires your income statement as of January 31, 2020. It is important to note that not all answers are required. Sections marked with a red star must be filled out. If not so marked, only fill them out if they apply to your business.

Business Owners Information

Here you will need to indicate whether your business is fully owned by another business. If owned by individuals, you need to provide information on each owner with a 20% stake or more. Information requested will include:

  • Social Security Number
  • Birthdate
  • Birthplace
  • Citizenship status
  • Street address

Additional Information

This section includes questions about criminal charges against any owners, then proceeds to submission of the application. Before submitting, check the box if you want to be considered for the up to $10,000 advance.

NOTE: Double-check your bank information to ensure a smooth process when it comes to direct deposit of your funds. When the agency processes your loan, it may request additional material, including federal tax returns and a year-to-date profitand-loss statement.

EIDL DEADLINE TO APPLY

Portions of the program, like the $10,000 grants, end on Dec. 30, 2020

How do I apply? Visit SBA.gov

FAQ

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