Key Highlights

  • Economic Injury Disaster Loan (EIDL) Program usually operates hand in hand with natural disasters – coronavirus now considered natural disaster like flooding, wildfires, etc.
  • Selling points of EIDL – as much as $10,000 up front, no repayment, disbursement supposed to be fast and loans up to $2M

The Economic Injury Disaster Loan Program (EIDL), an existing relief aid program under the Small Business Administration (SBA), coupled with the newly established Paycheck Protection Program to offer small businesses impacted by the coronavirus MUCH needed financial relief. Each program has been awash with complications and disastrous launches but let’s focus here on the specifics of the EIDL.

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EIDL Eligibility Requirements

Businesses, non-profits and veterans organizations in the US, territories and Washington DC with fewer than 500 employees are eligible to apply for EIDL loan as long ask these entities were operational as of January 31, 2020.

How to apply for EIDL

Click this link for an EIDL application:

Applicants can be a business/non-profit/veterans organization or a tribal small business concern with no more than 500 employees.

Applicants can be an individual operating under a sole proprietorship, with or without employees, or as an independent contractor.

The SBA relies on self-certification to verify the applicant’s eligibility under penalty of perjury.

Applicants are to be judged on their credit history and their ability to repay the loan received from the EIDL program. Applicants will also be asked about gross revenues, cost of goods, lost rents, operational expenses, number of employees and additional reimbursements they may be offered.

Double-check that the SBA is taking new applications in this second go-around of funding.  The agency was so overwhelmed with demand in the first go-around that it said it would sift through those already collected applications before reopening the process.

Amount of EIDL Program Loans

EIDL loans can be as much as $2M. Small businesses are subject to a 3.75% interest rate on that loan; non-profits are subject to a 2.75% interest rate. Terms may go up to 30 years

EIDL Grants or Loans?

EIDL applicants may receive a $10,000 emergency advance on their loans. This advance does NOT have to be repaid and is often considered a grant. According to Mark Baran, principal at the accounting firm Marks Paneth, “This loan is intended to be a very quick fix to help employers now. They call it an advance, but it’s just, ‘Here’s $10,000, use it for what you need.’”

How EIDL Funds May Be Used

EIDL funds may be used for any business purpose such as paid sick leave, payroll, buying materials, making rent and repaying obligations. Funds are NOT to be used for physical repairs, expansions, bonuses or re-financing long-term debt.

According to Ken Alozie, managing director of Greenwood Capital Advisors, “It’s relief funds meant for businesses that were sustainable before this crisis to enable them to weather through and minimize the amount of people they would have to lay off.”

Differences Between EIDL and PPP

The SBA is handling ALL administration of EIDL applications. EIDL loans are real loans that require repayments. The maximum loan amount for EIDL loans is $2M.

PPP applications MUST go through lenders first BEFORE the SBA steps in for processing/disbursement. PPP loans may qualify for forgiveness IF AND ONLY IF AT LEAST 75% OF PPP FUNDING IS SPENT ON PAYROLL COSTS. The maximum PPP loan can be up to $10M.

Businesses CAN Get both EIDL and PPP

According to Todd McCracken, president of the National Small Business Association, entities can apply for and receive funding from both the EIDL and PPP resources as long as the funding is NOT used for the same purpose.

Also, it is possible to roll an EIDL loan into a PPP loan in the hopes of qualifying for forgiveness or non-repayment and a decreased interest rate of 1%. Check out this webinar for further information:

EIDL Timeframe

Initially, the SBA promised that EIDL advances would go out within three days for a successful application but that is NOT happening. The SBA is overwhelmed with application requests…therefore, there is no timeframe as to when successful applicants may receive a $10,000 advance on their loans.

More To Know

Be on the lookout for EIDL scammers and fraud. Social media sites may NOT be the most accurate sources of real information.

Double-check sources. If your state SBA website says one thing and the national SBA website says something else, be persistent, check it out, be persistent, get a reliable answer and be persistent.

Double-check that the SBA is actually taking new EIDL applications. In its second round of funding, the SBA said it was NOT taking new applications because it was so overwhelmed with massive demand in the first round. That may have changed so check!


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Also read: Interest Rates Jump and Mortgage Applications Tank, Loan Limits Increasing to $510,400 by Fannie & Freddie in 2020, Help Your Clients Become Real Estate Literate with These Financial Terms

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