Just last week, the Small Business Administration (SBA) announced that it has reopened the Economic Injury Disaster Loan (EIDL) and EIDL Advance program. These EIDL loan applications are for eligible applicants and companies affected by the COVID-19 pandemic.

The EIDL program offers long-term, low-interest loans to small businesses and nonprofits. If your company hasn’t been able to procure financing through the Paycheck Protection Program (PPP), or even if it has, an EIDL may provide another avenue to relief.

EIDL Loan Applications & Program Overview

Applicants must be businesses with 500 or fewer employees, sole proprietors, independent contractors or certain other small entities. These SBA COVID-19 loans provide working capital up to certain limits.

The loans have terms of up to 30 years and interest rates of 3.75% for businesses and 2.75% for nonprofits. There is a deferment on the first payment for one year. Plus, the Coronavirus Aid, Relief and Economic Security (CARES) Act has temporarily waived requirements that applicants must have been in business for one year before the crisis and be unable to obtain credit elsewhere. Guaranteeing a loan by the borrower is not necessary if it is $200,000 or less.

Recipients must use EIDL proceeds for working capital necessary to carry a business until resumption of normal operations and for expenditures needed to alleviate specific economic hardships related to the pandemic. These may include:

• Fixed debts (such as rent or mortgage).
• Payroll.
• Accounts payable.
• Other bills that could’ve been paid had the disaster not occurred and aren’t already covered by a PPP loan.

Borrowers may not use EIDL proceeds to refinance indebtedness incurred prior to the COVID-19 crisis. In addition, they may not pay down other loans owned by the SBA or other federal agencies. Loan funds also cannot be used to pay federal, state or local tax penalties, or any criminal or civil fine or penalty. (Other limitations apply.)

Emergency Grants

Under the CARES Act, applicants may submit EIDL loan applications to request an Emergency Economic Injury Grant. This is also referred to as an “EIDL advance,” of up to $10,000. The grant is to be paid within three days and must be used to:

• Provide paid sick leave to employees unable to work because of COVID-19.
• Retain employees during business disruptions or substantial shutdowns.
• Meet increased costs to obtain materials unavailable because of supply chain disruptions.
• Make rent or mortgage payments.
• Repay other obligations that cannot be met because of revenue and net operating losses.

Recipients of an emergency grant don’t have to repay it — even if the business is eventually denied an EIDL. However, in April, the SBA announced that it has implemented a $1,000 cap per employee on EIDL advances up to the $10,000 maximum. Thus, an applicant with three employees would receive an advance of only $3,000.

Equally Valuable

The EIDL program may not have received as much attention as the PPP. However, but it’s equally valuable in the fight against small businesses permanent closing, striving to remain operational during the ongoing public health and economic crisis. We can help you determine whether you’re eligible and, if so, complete the EIDL loan application process.