On March 27, 2020, the CARES Act passed, providing economic relief and resources to U.S. citizens and businesses affected by the coronavirus. The CARES Act established multiple funding opportunities for businesses including economic injury disaster loans (EIDLs). Let’s unpack EIDLs to see if this assistance is right for you.
How much funding is available?
As of Sept. 9, 2021, the SBA has more than $150 billion in COVID EIDL funds. Loans are available through Dec. 31, 2021, or until funds are exhausted.
What types of loans are available?
There are three types of economic injury disaster loans:
- COVID-19 EIDL
- Targeted EIDL advance
- Supplemental targeted advance
If you meet the criteria for a targeted EIDL advance, you can receive up to $10,000 and the advance doesn’t have to be repaid. If you meet the criteria for a supplemental targeted advance, you can receive an extra $5,000 (for a maximum of $15,000) and you don’t have to repay the funds. You can find more information about those advances here.
This post will focus on COVID-19 EIDLs – a loan program designed to help small businesses recover from COVID-19’s economic impacts by providing capital. EIDLs are meant to help businesses meet their financial obligations and operating expenses that they could have met if COVID hadn’t occurred.
What is the maximum loan amount?
You can receive a maximum loan amount of $2 million. The SBA increased the cap from $500,000 to $2 million in September 2021. The SBA began approving loans greater than $500,000 on Oct. 8, 2021.
How is my loan amount calculated?
If your business was in operation before Jan. 1, 2019, your maximum loan amount could be:
- 2019 gross receipts or sales – 2019 cost of goods sold x 2 or $500,000, whichever is less
- For rental loss: Actual 2019 rent received – actual 2020 rent received x 2 or $500,000, whichever is less
If your business was in operation for part of 2019, part of 2020, or all of 2020, the SBA will calculate your loan amount. You’ll provide revenues, cost of goods sold, expenses; then the SBA will automatically calculate your maximum loan amount.
If your maximum loan amount is greater than $500,000, the SBA will underwrite the loan and perform a cash flow analysis to confirm your ability to repay the loan, as well as existing debt obligations. You’ll have the opportunity to pick your loan amount.
Your options are 1) the maximum loan amount calculated by the SBA or 2) a lesser amount that you set. You can’t apply for a loan beyond the SBA’s calculated amount or the $2 million cap – whichever is lower.
Am I eligible for an economic injury disaster loan?
- Are you physically located in the U.S. or a designated territory?
- Did you experience working capital losses during the COVID pandemic?
- Was your business in operation on or before Jan. 31, 2020?
If you answer yes to all three questions and have less than 500 employees, there’s a very good chance you’re eligible for a COVID EIDL.
However, you should confirm you fall within the SBA’s size standards before you start applying. You’re eligible for an EIDL if you’re:
- An individual who operates a sole proprietorship, with or without employees
- An independent contractor
- A business (including agricultural cooperative, aquaculture enterprise, nursery, or producer cooperative) categorized as a small business according to the SBA size standards
- All other agricultural enterprises are excluded
- A private, nonprofit organization (more details here)
- A business with no more than 500 employees
- A cooperative with no more than 500 employees
- An agricultural enterprise with no more than 500 employees
- An Employee Stock Ownership Plan (ESOP) with no more than 500 employees
- A tribal small business concern with no more than 500 employees
NEW | In August 2021, the SBA expanded COVID EIDL eligibility to include the hardest-hit industries. Why? Applications for the restaurant revitalization fund exceeded the amount of funding that was available and the program quickly ran out of money. More than 175,000 businesses didn’t receive the funds they needed.
Now, the following hardest-hit industries are eligible for economic injury disaster loans. They must have 500 or fewer employees per physical location, and together with its affiliates* have no more than 20 locations. The hardest-hit industries have NAICS codes beginning with:
- 61: Educational Services
- 71: Arts, Entertainment, and Recreation
- 72: Accommodation and Food Services
- 213: Support Activities for Mining
- 3121: Beverage manufacturers
- 315: Apparel Manufacturing
- 448: Clothing and Clothing Accessories Stores
- 451: Sporting Good, Hobby, Book, and Music Stores
- 481: Air Transportation
- 485: Transit and Ground Passenger Transportation
- 487: Scenic and Sightseeing Transportation
- 511: Publishing Industries (except Internet)
- 512: Motion Picture and Sound Recording Industries
- 515: Broadcasting (except Internet)
- 532: Rental and Leasing Services
- 812: Personal and Laundry Services
*An affiliate is a business that you control or a business you have 50% or more ownership.
Who isn’t eligible?
The SBA has a long list of businesses and activities that are ineligible for EIDLs. See pages 7-8 of their FAQs published on Sept. 3, 2021.
Do I have to repay the loan?
Yes. COVID EIDLs must be repaid. They aren’t forgivable loans. The loan term is 30 years with payments deferred for the first two years. You’ll repay the loan over the next 28 years. There’s no prepayment penalty so you could opt to pay the loan off early. Interest will accrue during the deferment period. Interest rates are capped at 3.75% for businesses and 2.75% for nonprofits.
How can I use my COVID EIDL funds?
Economic injury disaster loans were designed to help you pay payroll and operating expenses. Therefore, the allowable uses for this loan include:
- Inventory, raw materials, variable costs
- Other ordinary business expenses
- NEW | Paying business debt incurred at any time (past, present, or future)
Now, if you received another form of COVID relief from the SBA – a Paycheck Protection Program (PPP) loan, Restaurant Revitalization Fund, or a Shuttered Venue Operators Grant – you can’t use the EIDL for the same costs as you did for those programs. For example, if you received a PPP loan and a COVID EIDL, you could use your PPP loan for paying payroll and your EIDL for paying business expenses. You couldn’t use both for payroll.
Can I increase my loan?
Yes! If you already received a COVID EIDL, you can apply for a loan increase. After confirming your eligibility, log in to the SBA portal to request a loan modification. Complete the required actions in the portal and submit the necessary documents. The SBA will follow up for signatures, confirmations, and any additional documents.
You can expect a decision on your loan increase request from the SBA in several weeks.
What are the lending requirements?
The SBA requires collateral for loans greater than $25,000. A personal guaranty is required for loans greater than $200,000. View page 4 of the FAQs to learn more.
Where do I apply?
You apply for an EIDL directly on the SBA’s website, here. The SBA estimates it’ll take you about two hours to complete the application.
The SBA takes several weeks to one and a half months to approve or decline loans. Don’t reapply if you don’t hear from the SBA. Instead, check the status of your application by logging into your account in the SBA portal. If you’d like your application to move quickly, respond quickly to the SBA’s requests for information.
An SBA loan officer may contact you by telephone or email. Don’t interact with any email address that doesn’t end with @sba.gov.
How do I apply? What do I need to submit?
The SBA will ask for the following information when applying for the loan. We recommend compiling it before you begin.
- Standard business identifying information (business legal name, EIN/SSN, organization type)
- Ownership details
- Federal income taxes and IRS Form 4506-T
If your loan is greater than $500,000, you’ll need to provide:
- ODA Form P-022 – Standard Resolution
- SBA Form 2202 – Schedule of Liabilities
- SBA Form 413 – Personal Financial Statement
- List of real estate owned (a template can be found on the intake form)
This list isn’t exhaustive. The SBA may ask for additional information and documents. We recommend you review the Supplemental/Checklist for COVID EIDL Intake Form for a list of the information you may have to provide during the application process.
Originally published 4/3/2020. Updated 11/3/2021.
Have questions about the COVID-19 EIDL program? Here are some helpful resources.