EIDL loans for small businesses
Update: Improvements to Covid EIDL program
With many businesses still struggling with the ramifications of the Covid-19 pandemic, the SBA has improved the Covid Economic Injury Disaster Loan (EIDL) program to help the hardest-hit businesses. Here’s a summary of the changes:
- Qualified applicants can now borrow up to $2 million (up from $500,000 previously).
- EIDL funds can be used to pay and prepay commercial debt and pay federal business debt
- Payments can now be deferred for two years, not just one.
- Until October 8, 2021, only loans of $500,000 or less will be approved and disbursed, giving smaller businesses an exclusive window of time to apply and receive funds.
- Affiliation requirements have been simplified, and now model those of the Restaurant Revitalization Fund.
You can apply for a Covid-19 EIDL loan here.
You’ve probably heard of the alphabet soup of stimulus and loan programs that have been created by the government in response to the economic consequences of COVID-19, like the PPP, MSL, and CARES Act. However, there’s another program that the Small Business Administration (SBA) offers that’s getting less attention, and there are still funds available.
Related: What is in the CARES Act?
What is an EIDL?
The Economic Injury Disaster Loan, or EIDL, program is administered by the SBA and has been helping small businesses recover from disasters for years. Typically, the program is available in limited geographic regions that have experienced hurricanes, tornados, or other natural disasters. Right now, though, it’s available for small businesses nationwide who have experienced a temporary loss of revenue due to the pandemic.
The interest rate on an EIDL loan is 3.75%, or 2.75% for non-profits. The term of the loan is 30 years, and repayment must begin 12 months after the approval of the loan.
Loans for over $25,000 must be secured by the assets of the business. Loans for $25,000 or less do not require collateral. Due to high demand, the SBA has reportedly capped the loan amount at $150,000, according to CNBC.
Who is eligible for an EIDL?
Businesses with not more than 500 employees, sole proprietors, and independent contractors are eligible, as are non-profits, for EIDL. Some businesses with more than 500 employees may also be eligible if they are considered ‘small’ by SBA standards.
How do I apply for an EIDL?
The EIDL application has been streamlined in light of COVID-19. You’ll need to answer some basic questions about your business and the amount of revenue you have lost due to the pandemic. The application is completed entirely online and you’ll get an email confirming your application and another email if your application is approved.
What can I use the EIDL money for?
EIDL funds can be used for working capital, including payroll, rent and utility expenses, and other expenses that the business would have been able to pay if not for the pandemic.
The EIDL program has provided an advance against the EIDL loan of up to $1,000 per employee which did not have to be repaid. Funds for the advance program have been depleted, so this option is no longer available but new loans are still being approved.