Economy Injury Disaster Loan (EIDL) Program

Economic Injury Disaster Loan (EIDL) and EIDL Advance

The Small Business Administration (SBA) has reopened applications for the Economic Injury Disaster Loan (EIDL) and EIDL Advance. The loans and advances are made directly by the SBA to approved applicants. The application is live on for all eligible businesses.

EIDL Advance Payment

Small business owners can apply for an Economic Injury Disaster Loan advance of up to $10,000 ($1,000 per employee up to 10). Sole proprietorship’s without employees, independent contractors, freelancers and gig workers may be eligible for a $1,000 grant. This advance is designed to provide relief to businesses experiencing a temporary loss of revenue. This loan advance will not have to be repaid. Recipients do not have to be approved for a loan in order to receive the advance, but the amount of the loan advance will be deducted from total loan eligibility and offset PPP loan forgiveness.

Economy Injury Disaster Loan

The EIDL program is not new and typically runs connected to natural disasters (floods, wildfires, etc.). It is intended to provide a quick cash infusion to US persons, in this case small business owners, that are impacted directly by disasters.

Who is Eligible for EIDL?

Businesses impacted by COVID-19 in all 50 states, the U.S. territories and Washington, D.C., with fewer than 500 employees are eligible, as are private nonprofits, veterans organizations, and agricultural businesses. Some heavily impacted industries can exceed the 500-employee limit and remain eligible.

How Do I Apply for an EIDL?

The application is live on for all eligible businesses. Applications will be processed on a first-come first-served basis.

EIDL and EIDL Advance Payments Eligible and Ineligible Uses

Eligible uses of the EIDL funds include:

  • 6 months of operating costs
  • Monthly payments of long-term assets (vehicle, mortgage)

Ineligible uses of the EIDL funds include:

  • EIDL proceeds cannot be used for the same expenses as PPP funds (if received)
  • Refinance or payoffs of long-term debt
  • Payment of dividends or bonuses
  • Disbursements to owners, partners, officers, directors, or stockholders (unless directly related to performance of services for the benefit of the applicant)
  • Repayment of stockholder/principal loans (except when the funds were injected on an interim basis as a result of the disaster and non-repayment would cause undue hardship to the stockholder/principal)
  • Expansion of facilities or acquisition of fixed assets
  • Repair or replacement of physical damages
  • Payment of any part of a direct federal debt, (including SBA loans) except IRS obligations
  • Contractor malfeasance
  • Relocation

Loan Agreement

We strongly suggest reviewing all agreed terms to ensure loan compliance. Depending on your entity type, you may be required to provide additional documentation to the SBA after the loan is executed. Support documentation to prove loan usage should also be retained to prove compliance if your loan is audited at a future date. The SBA requires that you keep books and records “for the most recent 5 years until 3 years after the date of maturity, including extensions, or the date this Loan is paid in full, whichever occurs first.” In addition, you will have to keep “itemized receipts (paid receipts, paid invoices or cancelled checks) and contracts for all loan funds spent.”  In summary, it’s very important to keep good records. Need help with your bookkeeping? We can assist! Schedule a consultation here.

Loan Terms

  • Loans up to $2M (Reportedly reduced to $150K unofficially)
  • 30-year terms
  • Interest rates of 3.75% for small businesses (2.75% for non-profits)
  • First payment is 12 months from the date of the promissory note
  • Loans smaller than $200,000 can be approved without a personal guarantee
  • Loans under $25,000 the SBA does not take a security interest in any collateral
  • Loans above $25,000 the SBA takes a general security interest in any and all “Collateral” as defined in the promissory note
  • No prepayment fees

Have questions? Need more information? Schedule a free consultation today!

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