The COVID-19 pandemic hit the small business community hard. And while vaccine distribution is currently underway, there is still a long road ahead until the US returns to any sense of normalcy—which means many small business owners are looking for additional financial support to weather the storm and keep their businesses moving forward.
While the Paycheck Protection Program (PPP) has been a popular option, PPP loans can only be used to cover payroll expenses and approved non-payroll costs—and those restrictions don’t work for every business.
That’s where Economic Injury Disaster Loans (EIDL) come in. In 2020, the EIDL program approved over 3.6 million EIDL loans, distributing $195B in disaster assistance to small businesses across the country.
But what, exactly, is the EIDL program? What is the program’s status for 2021? And how can small businesses leverage the program to get the funding they need to navigate the continuing coronavirus crisis?
What are EIDL loans?
The EIDL program is a disaster relief fund administered through the U.S. Small Business Administration (SBA). The SBA Economic Injury Disaster Loan program provides emergency loans to small businesses facing economic hardship and challenges as the result of a declared disaster—like the COVID-19 pandemic.
Unlike PPP loans, EIDL loans are not forgivable; borrowers will need to pay back the full loan amount plus interest. But one major selling point for businesses in need of funding? EIDL loans offer much more competitive terms than traditional loan options.
Currently, Economic Injury Disaster Loans offer a 3.75 percent fixed interest rate (that interest rate is even lower for nonprofit organizations/non-profits at 2.75 percent), a 30-year repayment period, 24-month payment deferral period, and no fees or prepayment penalties.
Loan proceeds can be used to cover working capital and normal operating expenses, including payroll, purchasing equipment and all forms of debt, with a maximum loan amount of $2 million. If your business has already received a loan via COVID EIDL, you're likely eligible for an increase and can request one via the SBA portal.
Note: The maximum loan amount increased from $500,000 to $2 million on Sept. 8, 2021, however businesses will need to wait until after Oct. 8 to hear back on whether they're approved for anything above $500,000. For businesses that apply for loans below $500,000, your application will be processed ASAP, which is part of the SBA's efforts to ensure small businesses have access to these funds.
In order to qualify for an EIDL loan, businesses must meet the following eligibility criteria:
- The business was operational as of January 31, 2020
- The business entity falls under one of the following categories: small businesses, qualified agricultural businesses, eligible nonprofit organizations, Veterans organizations, Tribal organizations, independent contractors, self-employed individuals, or sole proprietors
- The business has fewer than 500 employees (or meets the SBA’s small business size standard for their industry)
- The business is not currently involved in bankruptcy proceedings
What is a Targeted EIDL Advance?
If you're in a low-income community, you might be eligible to receive up to $15,000 in additional funds from the SBA that don't need to be repaid through the Targeted EIDL Advance and Supplemental Targeted Advance programs.
You can think of these loan advances like a grant, but without the usual requirements that come with a federal government grant. To get these advance funds, first apply for a COVID-19 Economic Injury Disaster Loan (we'll cover that below). You don't need to accept the loan or be approved to get an advance. If you're an eligible business, the SBA will invite you to apply. And, depending on your business' size and the losses you suffered, you could receive both of these advances.
The Targeted EIDL Advance program offers up to $10,000 in aid. Eligibility requirements include:
- That you live in a low-income area. Check to see if your area qualifies with this map.
- You can show a 30 percent reduction in revenue during an 8-week period starting March 2020, compared to the previous year.
- Have 300 or fewer employees
Meanwhile, the Supplemental Targeted Advance offers $5,000 in aid. Eligibility requirements include:
- You must be located in a low-income community (again, you can use this map).
- You can show a greater than 50 percent economic loss over an 8-week period since March 2, 2020, compared to the previous year.
- Have 10 or fewer employees.
What’s the current status of EIDL? Is the program currently accepting applications?
So, now that you understand what EIDL loans are, let’s jump into where the program stands today.
Currently, the EIDL is accepting new applications and approving new loans. The SBA plans to continue accepting new EIDL applications through December 2021 (pending the availability of funds).
What is the application process for EIDL loans?
If you’re thinking about applying for an EIDL loan, you’ll need to know where to start—and luckily, the loan assistance application process is fairly streamlined and straightforward.
Small businesses interested in applying for an EIDL loan can apply directly through SBA.gov. According to the SBA’s EIDL Application Checklist, in order to apply for an EIDL loan, you’ll need to submit
- An electronic disaster loan application (SBA Form 5 or 5C)
- The company’s most recent 3 years of business tax returns
- A tax authorization form (IRS Form 4506-T)
- A personal financial statement (SBA Form 413)
- A schedule of liabilities (SBA Form 2202)
After submitting an application through the SBA portal, you’ll receive a loan quote. It’s important to note that the quote is NOT an approval—and it doesn’t necessarily reflect how much your EIDL loan will be. The loan quote is an estimate of your qualified loan amount; you can apply for any loan amount up to your quote maximum.
Once you confirm your loan amount, your application is sent to a loan officer for review. Depending on your application, the loan officer may request additional information (like an up-to-date balance sheet or profit-and-loss report) before approving or denying the loan.
Once the loan officer signs off on the loan, you’ll receive an email that lets you know whether your loan was approved or denied. If your loan was approved, the email will have next steps on how to sign your loan documents and receive your funds. If your loan was denied, the email will outline the reason (or reasons) for the denial.
How long does it take for EIDL applications to be processed?
One of the big questions borrowers have when applying for a Covid-19 EIDL loan is “how long will it take for my application to be processed?”
And, unfortunately, that question doesn’t have a one-size-fits-all answer.
The length of time it takes to process your EIDL application can vary based on application volume, from a few days to a few weeks—but typically, new applications are processed within 21 days. And If your loan is approved, the SBA will move forward with loan disbursement pretty quickly; loan proceeds should hit your bank account within 5 to 10 business days.
How can I check EIDL loan status?
One of the most challenging parts of applying for an SBA disaster loan is waiting for your application to be processed. But luckily, there are a few different ways you can check the status of your application:
By Phone: SBA Disaster Assistance Customer Service Center: 1-800-659-2955 (TTY/TDD: 1-800-877-8339) (Monday to Sunday, 8am to 8pm ET)
By Email: email@example.com
To check the status of your Targeted EIDL Advance application and/or Supplemental Targeted Advance application, visit the SBA portal or call the customer service phone number listed above. You can also email TargetedAdvance@sba.gov.
Depending on how you check your loan status, you may need to provide verifying information (for example, if you check your loan status through the SBA portal, you’ll need your username and password—while if you reach out for your application status via email, you’ll need to provide your full legal name, application number, and potentially additional verifying information, like your federal tax ID).
What happens if my EIDL loan is declined?
If you’re applying for an EIDL loan, you need the funds—and if your loan gets declined, it can be extremely discouraging.
EIDL loans are denied for a variety of reasons (think credit history, incomplete or unverifiable information, or ineligible business activity). But if your loan is declined, you’re not out of options! There are alternative routes you can take to get the financial assistance you need to keep your business moving forward, including:
Appeal the decision
If your EIDL loan is denied, you have up to six months to request reconsideration, either via email (by sending an email to firstname.lastname@example.org) or mail (by sending a request to U.S. Small Business Administration Disaster Assistance Processing and Disbursement Center, 14925 Kingsport Road Fort Worth, Texas 76155).
Can I still apply for a loan through the Paycheck Protection Program
The Paycheck Protection Program is no longer accepting new applications. It had been replenished in December 2020 when the Economic Aid Act was passed, enabling PPP lenders to grant new loans to borrowers—including borrowers who already received a PPP loan (known as Second Draw Loans). The program, however, ended May 31, 2021.
If you got a PPP loan, and you're planning to submit a loan forgiveness application, you can start applying the day after your covered period ends and for the 10 months thereafter. For people who applied early on in the program (i.e. in April 2020 and for a covered period of eight weeks) your deadline to apply for forgiveness was some time in mid-July 2021. If you don't apply in time, you'll be responsible for monthly interest and principal payments.
Get the funding you need to keep your business moving forward through COVID
There’s no denying that COVID is presenting major challenges for small businesses. But now that you have a better understanding of the Economic Injury Disaster Loan program (including how to apply for a low-interst loan and check your application status) you’re armed with the information you need to submit an application—and, hopefully, secure the funding you need to keep your business moving forward through the pandemic.