Update May 6, 2022: EIDL loan funds have been exhausted. You can no longer request loan increases at this time, but you can read on to get more acquainted with program in case it ever comes up again.
If you’re a small business owner struggling to stay afloat because of COVID-19, you may be eligible for borrower-friendly funds from the government.
The federal government created several programs to help small businesses recover from the economic impact of the virus throughout the pandemic. COVID-19 Economic Injury Disaster Loan (EIDL) is one of them.
On September 8, 2021, the U.S. Small Business Administration announced a change to EIDL. The updates include an EIDL loan increase and more flexibility when using the funds.
You can request an EIDL loan increase for up to two years after your loan date, or until the funds are exhausted. The SBA expects funds to run out by mid-April 2022, so now is the time to request that increase.
Note: Only businesses that already have an EIDL loan can request an increase. If you don't have one, unfortunately the SBA is no longer accepting new applications for EIDL loans.
So, how do you apply for an EIDL loan increase?
Let’s find out.
EIDL Loan Refresher
An EIDL loan is a long-term low-interest loan from the U.S. Small Business Administration (SBA). It’s intended to help small businesses cover operating expenses and other financial obligations that they’re unable to meet because of a pandemic or natural disaster.
The initial COVID-19 EIDL program offered coverage for up to 24 months of economic injury, with a maximum loan cap of $500,000. If you’re awarded funds through an EIDL loan program, you could spend those on working capital and regular expenses like healthcare benefits and rent.
The SBA defines a small business as a business or agricultural enterprise with fewer than 500 employees, including affiliates.
Some businesses in industries that were the most impacted by the pandemic were allowed to apply for the program even if they had more than 500 employees. You can view the complete list of qualifying industries by their NAICS codes on the loan eligibility screening page.
To be eligible for the program, your business must be physically located in the United States and have experienced working capital losses due to COVID-19.
Here are some additional eligibility requirements:
- The business must have been in operation on or before January 31, 2020.
- The business must have a valid IRS-issued Taxpayer Identification Number (TIN).
- Owners, members, or partners that own more than 20 percent of the business must be U.S. citizens, non-citizen nationals, or qualified aliens with a social security number.
The COVID EIDL loan program stopped taking new applications on December 31, 2021, however you can still apply for an increase up to your maximum eligible loan amount.
EIDL Loan Terms
Unlike the Paycheck Protection Program (PPP), the EIDL is a loan and must be repaid.
Here’s a refresher of the loan terms in the EIDL program:
- Loan terms: 30 years
- Maximum loan amount: $2 million
- Interest rate: 3.75% fixed for businesses; 2.75% fixed for private nonprofit organizations
- Payment deferment: Automatically deferred for 30 months with interest accruing during the deferment period
- Prepayment penalty: None
- Collateral: Required for loans greater than $25,000
- Personal Guaranty: Required for loans greater than $200,000
EIDL Loan Increase and Program Updates
At the start of September 2021, the SBA published updates to its COVID EIDL program, including a loan cap increase.
The program updates are as follows:
- The maximum loan cap increased from $500,000 to $2 million.
- You can now use funds to pay for payment or prepayment of commercial business debt.
- You can now use funds to pay for regularly scheduled federal debt payments.
- The first payment is now automatically deferred to 30 months (this update came in March 2022).
- Simplified affiliation requirements: You are considered an affiliate of any business you control or have at least 50 percent ownership in.
- Expanded eligibility to businesses in industries most affected by the pandemic (industries listed using the North American Industry Classification System (NAICS) codes).
Most of the changes went into effect on September 8, 2021, but applicants requesting more than $500,000 had to wait until October 8, 2021 for the SBA to begin approving.
As a small business owner, you have access to more funds after this update and can also use those funds for debt payments.
However, you may not use the funds to expand your business, make prepayments on a federal loan, or start a new business.
Who Should Apply for a Loan Increase?
You may want to consider an EIDL loan increase if you’re a small business owner struggling to pay your bills or if your total economic injury is greater than $500,000.
To get the increase, you already need to be a participant in the program. At this time, the SBA is no longer taking applications for new EIDL loans.
If you already have an EIDL loan, you can submit a request for a loan amount increase up to your maximum eligible amount. But do so quickly, as funds are expected to run out by mid-April 2022.
Understanding Your Maximum Eligible Loan Amount
The COVID EIDL program determines how much money you can apply for based on how long you have been in business, and it's called your maximum eligible amount. You can apply for an increase up to this amount.
If your business was in operation on or before January 1, 2019, then you can use the following formula to calculate your maximum eligible loan amount:
Maximum Eligible Loan Amount = (2019 Gross Sales - 2019 Cost of Goods Sold) x 2
The SBA internally calculates the maximum eligible loan amount for businesses started after January 1, 2019 (but before January 31, 2021).
How To Apply for an EIDL Loan Increase
Businesses with existing loans can apply for funds from the SBA loan program.
You should request a loan increase through the EIDL portal instead of submitting another application. In other words, make sure you submit one loan application per business.
If you already have an EIDL loan, you can follow these steps to submit a request for a loan increase under the higher loan limits update:
- Log in to your SBA EIDL portal account (do not create a new application). The web address is https://covid19relief1.sba.gov
- In the Status section of your dashboard, select Request More Funds.
- Answer questions in the portal.
- Submit any required documents.
- Enter your loan increase request amount.
How To Apply for an Increase Through Email
The best way to request more funds is through the SBA portal. However, if you don’t see the Request More Funds button on your dashboard, contact the SBA via email.
Send an email to CovidEIDLIncreaseRequests@sba.gov, and type “EIDL Increase Request for [Your 10 digit application number]” in the subject line.
Your email should include the following information to identify your business:
- Application number
- Loan number (if you’ve already been approved)
- Business name and address
- Business owner name(s)
- Phone number
Don’t include any financial documents or other attachments in your initial email. The SBA will follow up and let you know which documents they need.
How To Apply for a New Loan
Update: You can no longer apply for a new loan, but you can read on to get more acquainted with the process in case it ever comes up again.
Here are the steps to follow for submitting a new EIDL application.
- Complete the Intake Form.
- Sign up for the SBA portal (you’ll receive an email invite after completing your intake form).
- Complete the portal steps.
- Submit all relevant documents (listed at the bottom of this section).
- Respond to SBA requests for signatures, confirmations, or additional documents.
You can speed up the process by ensuring you have your tax information handy when you get started. Altogether, the process shouldn’t take more than an hour.
Required EIDL Loan Documents
When applying for the EIDL program, you’ll need to provide several documents to help the SBA calculate your economic injury.
All loan applicants must submit the following documents to confirm federal income taxes:
- Federal income taxes
- IRS Form 4506-T (Request for Transcript of Tax Return)
- ODA Form P-022 Standard Resolution
If you’ve already filed IRS Form 4506-T for another loan program, you’ll need to file a new one for the EIDL.
For those of you applying for a loan greater than $500,000, you need to provide the additional documents:
You will also have to provide a list of the real estate you own using the intake form template.
The SBA may request additional forms from you during the application process. Keep checking your SBA portal and email accounts while waiting to hear back about your application.
Requirements for Loans Greater Than $500,000
If your economic injury is greater than $500,000, you can apply for a higher amount. The SBA will perform a cash flow analysis on your business to determine your loan amount.
For loans of $500,000 or lower, you must meet a minimum credit requirement of 570. However, if you plan to apply for more than $500,000, you need a minimum credit score of 625.
Additionally, for loans larger than $500,000, you must sign a UCC-1 statement (Universal Commercial Code-1) and put up business real estate as collateral.
A UCC-1 ensures that lenders (the SBA in this case) will be paid if you default on your loan or file bankruptcy. It’s a public statement showing that the SBA can claim your business property if you don’t pay your loan.
What To Expect After You Apply
After you apply for your loan, you can check the SBA portal to see the status of your application. You’ll be able to see if they are processing your loan or if it has moved to the funding stage.
The decision timeline for loans less than $500,000 is three weeks. For loans greater than $500,000, it may take up to six weeks to receive a decision.
If approved, you’ll need to submit the final documents, and the funds should be dispersed within a week.
Once the EIDL funds hit your account, you can use them to pay for operating expenses and business debt. All loan repayments are automatically deferred for two years following the origination of your loan. But keep in mind that interest will accrue during this time.