Applying for an Economic Injury Disaster Loan (EIDL) from the SBA

March 17, 2020 - 5 minutes read

Updated: 6/16/20

Note: The implementation of COVID-19 relief programs is a fluid situation with new details released daily. We strive to keep this information as up-to-date as possible and will highlight important changes you should be aware of.

The U.S. Small Business Administration (SBA) has designated COVID-19 as a qualifying event for the provision of Economic Injury Disaster Loans (EIDL) for businesses and private non-profits in declared zones.

Updates as of June 16, 2020:

  • The EIDL application portal is currently accepting new applications
  • SBA will resume processing applications that are already in que in the order they were received 
  • Call the SBA directly to check on the status of your application at 800-659-2955 or email at disastercustomerservice@sba.gov

What is the EIDL?

The EIDL is a low-interest, fixed-rate loan that can provide up to $2 million in assistance for a small business. SBA’s Economic Injury Disaster Loan (EIDLs) funds come directly from the U.S. Treasury. Applicants do not go through a bank to apply, and instead, apply directly to SBA’s Disaster Assistance Program.

Actual loan amounts are based on the amount of economic injury. These loans provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing because of COVID-19. The EIDL helps meet the necessary financial obligations that your business or private non-profit organization could have met had the disaster not occurred. EIDLs do not replace lost sales or revenue.

Is my business eligible to apply for the EIDL?

The EIDL provides up to $2 million of financial assistance to small businesses or private, non-profit organizations that suffer substantial economic injury as a direct result of the declared disaster. This includes:

  • Businesses directly affected by the disaster
  • Businesses that offer services directly related to the businesses in the declaration
  • Other businesses indirectly related to the industry that are likely to be harmed by losses in their community (Example: Manufacturer of widgets may be eligible as well as the wholesaler and retailer of the product.

Depending on your industry, a small business could be defined as business with a maximum of 250 employees or a maximum of 1,500 employees. The business can be a sole proprietorship, LLC, corporation, or private non-profit.  To see if your business qualifies, see the SBA’s definition of a small business here.  

Organizations that are not eligible include religious and charitable organizations, gambling concerns (Ex: Concerns that derive more than 1/3 of their annual gross revenue from legal gambling activities), and casinos and racetracks (Ex: Businesses whose purpose for being is gambling (e.g., casinos, racetracks, poker parlors, etc.) are not eligible for EIDL assistance regardless of 1/3 criteria above.

What can the funds be used for?
These working capital loans may be used to pay: 

  • Providing paid sick leave to employees;
  • Maintaining payroll;
  • Meeting increased costs to obtain materials;
  • Making rent or mortgage payments; and/or
  • Repaying obligations that cannot be met due to revenue losses.

The working capital loan may not be used for refinancing, expansion, growth of any kind, or infrastructure improvements.

What is the lending criteria?

  • Repayment As with all loans, you will need to prove that you have the ability to repay the loan.
  • Collateral – When applying for loans greater than $25,000, the business must provide collateral The SBA requires borrowers to pledge what is available including real estate. Loans under $25,000 can be unsecured.

What are the terms?

The interest rate is 3.75% for small businesses without credit available elsewhere.

SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

When can I apply?

The SBA resumed accepting new Economic Injury Disaster Loan (EIDL) applications on June 15 to all qualified small businesses, including U.S. agricultural businesses.

Remember:

  • If your loan is approved you are not obligated to accept the funds
  • The EIDL is not your only option. The Michigan SBDC team can help you determine the best course of action for your business.

The Michigan SBDC is here to help you respond and plan for the future of your business.  Please contact us if you need help determining if the EIDL is right for your business, need assistance in completing the application, or have questions regarding the economic recovery process.