On July 11, 2020, the U.S. Small Business Administration (SBA) announced it would no longer be granting advances under the Economic Injury Disaster Loan (EIDL) program.
The EIDL advance program provided small businesses, independent contractors, nonprofits, and agricultural businesses a total of $20 billion in emergency funding. See SBA Opens Up New Grants and Loans for Small Businesses And Independent Contractors: The EIDL Program.
The EIDL advance program provided a $1,000 grant per employee of a small business, up to a maximum of $10,000. Independent contractors were entitled to $1,000. The grant did not need to be repaid. Recipients did not have to be approved for a loan in order to receive the advance.
SBA Administrator Jovita Carranza stated:
“Following the enactment of COVID-19 emergency legislation, the SBA provided nearly six million small businesses employing 30.5 million people with $20 billion through the unprecedented EIDL Advance program. This program, built from the ground up in less than two weeks, assisted millions of small businesses, including non-profit organizations, sole proprietors and independent contractors, from a wide array of industries and business sectors.”
Having allocated the full $20 billion that was appropriated by Congress, the SBA said it will discontinue making EIDL advances to new applicants. By law, the SBA is not permitted to issue new EIDL advances once all program funding has been obligated.
It is possible that Congress will allocate more funds to the advance program as it did in April 2020.
The Good News—EIDL Loans Still Available
The good news is that the SBA is still processing loan applications for EIDL loans. These are available for small businesses, independent contractors, gig workers, nonprofits and agricultural businesses. But the available funds may run out soon, so it’s best to apply as soon as possible.
The EIDL loans have the following key terms:
- The amount of the loan depends on your business and what the SBA determines is appropriate (loans have ranged from $1,000 to $2 million, although there may be a cap now of $150,000).
- Interest rate is 3.75% (2.75% for nonprofit organizations).
- The SBA will run a credit check.
- The loan is repayable over 30 years (so the monthly payments are manageable).
- Any payment is deferred for a year (but interest accrues during that year).
- The loan is pre-payable at any time without penalty.
- Loans over $25,000 may require collateral.
- Loans over $200,000 may require a personal guarantee.
- Unlike PPP loans, the EIDL loans are not forgivable.
What Can EIDL Loans Be Used For?
EIDL loans can be used for:
- Working capital to continue operations
- Necessary expenditures to alleviate the specific economic injury suffered from COVID-19
- Sick leave to employees unable to work due to the direct effects of COVID-19
- Maintaining payroll
- Increased supply costs
- Rent or mortgage payments
- Repaying debt that cannot be otherwise repaid due to revenue losses
EIDL loan proceeds cannot be used to refinance debt incurred prior to COVID-19 or repair physical damage or pay dividends.
How to Apply for an EIDL Loan
The application process is relatively easy, and only takes about 15 minutes. Here is where you can apply.
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- Newly Available CARES Act Loans: 10 Things Small Businesses Need to Know
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