March 28, 2020 6:28pm
GLI’s Guide to the Economic Injury Disaster Loan Program
The Economic Injury Disaster Loan Program, or EIDL, is a major federal loan program designed to support small businesses coping with major crises and disasters. It is administered by the U.S. Small Business Administration (SBA) and was recently modified by the CARES Act, the major COVID-19 relief bill passed by Congress. EIDL predates the newly created Paycheck Protection Program, which you can read about here. Unlike with PPP, businesses interested in the EIDL program should apply directly through the SBA. PPP applicants will be required to go through certified lenders.
- The state in which the business is located must have received a federal disaster declaration. Kentucky and Indiana have both received this declaration, so the door to apply is wide open.
- The business has less than 500 employees – this includes co-ops and nonprofits. If the business has more than 500 employees it can still qualify as a small business under SBA’s size standards.
- Sole-proprietors and independent contractors are eligible.
- Restrictions apply, such as not being in the business of lobbying, cannot be a farm, or derive more than one-third of revenue from gambling.
- Lending criteria includes having a credit history, the ability to repay the loan, and collateral depending on the size of the loan. Thanks to the CARES Act, several former criteria have been waived, such as personal guarantees for loans less than $200,000 and a requirement that the business must be at least one year old.
- Loan amounts are based on the amount of economic injury but are capped at $2 million. The EIDL program is not intended to make up for lost revenue or sales.
- Under the CARES Act, the EIDL program now offers an advance of up to $10,000. This advance is forgivable that is to be distributed by SBA within 3 days of the application regardless of whether or not the loan is approved.
- Interest for for-profit businesses is 3.75 percent; 2.75 percent for nonprofits.
- Maximum repayment terms are up to 30 years.
- Repayment can be deferred up to one year.
- Funds must be used for fixed debts, payroll, and/or other bills that cannot be paid due to the disaster. Fund CANNOT be used for refinancing, infrastructure improvements, or expansions.