By Jennifer Shaffer
The Economic Injury Disaster Loan (EIDL) program under the Small Business Administration is not new. Since its inception, it has helped small businesses obtain funds needed during federally declared disasters. During the COVID-19 pandemic, this program was modified to serve as another avenue for businesses to access much-needed funding alongside other programs, such as the Paycheck Protection Program (PPP). The CARES Act legislation created this new EIDL program, the COVID-19 EIDL, which waived certain requirements of the original program to more appropriately fit the circumstances brought about by the pandemic.
To be eligible, applicants must be physically located in the United States and able to demonstrate they suffered working capital losses from COVID-19. Applications are available online through the SBA’s portal and the deadline for approval is December 31, 2021. The application can be found by clicking here.
Loan sizes were originally limited to the lower of $150,000 or six months of working capital; however, this limit was later increased to the lower of 24 months of working capital up to a maximum of $500,000 and finally to a maximum loan amount of $2 million.
Other key features of the loan include an interest rate of 3.75% and deferred payments for the first 2 years. Loan proceeds can be used for working capital needs to make regular payments for operating expenses, including payroll, rent/mortgage, utilities, other ordinary business expenses, and to pay business debt incurred at any time. Additional loan details can be found on the COVID-19 EIDL page on the SBA website.
Funds may not be used to expand your business, make prepayments on debt owed by a federal agency or to start a new business.
Some information required as part of the application include:
- Eligibility questions
- Gross revenues and cost of goods sold information
- General business information, as well as ownership information
- Bank accounting and routing information
- Certifications that all information is truthful and that additional information will be provided upon request
More specific information is included as part of the Frequently Asked Questions document.
Once the initial application has been submitted, the SBA will contact borrowers with any additional follow-up requests needed. The borrower will receive a loan quote and review the application, upon which a decision is made whether the loan is approved or declined.
Scheduling a meeting with your tax or other financial advisor is recommended to determine if you are eligible for this program and if it is right for your organization. Similar to other COVID-19 relief programs, other types of funding already received could impact the EIDL loan. A listing of cross-program eligibility rules can be found by clicking here.