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

March 17, 2020 - 9 minutes read

Updated: 2/4/21

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 February 4, 2021:

Targeted EIDL Advance: Frequently Asked Questions

The U.S. Small Business Administration has put together a FAQ to answer common questions regarding the application process, eligibility, program criteria and more.

Updates as of January 8, 2021:

The U.S. Small Business Administration announced that the deadline to apply for the Economic Injury Disaster Loan (EIDL) program is extended through December 31, 2021. EIDL applications will continue to be accepted through December 2021, pending the availability of funds. Loans are offered with a 3.75% interest rate for small businesses and 2.75% for nonprofit organizations. Every Michigan small business is encouraged to apply to get the resources they need.

Grants for EIDL Advances and Other Changes to Program

When EIDL (Economic Injury Disaster Loan) grants were passed by Congress, they allowed for a $10,000 “Advance” to be treated as a grant, not a loan. Trump’s SBA unilaterally scaled back that grant to only be $1000 for each employee, counteracting Congressional intent. This addresses that issue.

  • Businesses in low-income communities that received an EIDL loan can get a grant equal to the difference of what they received and $10,000.
  • Eligible Businesses in low-income communities that did not get EIDL loans/Advance grants because funds had run out can now get $10,000.
  • Also, if you previously received both an EIDL Advance grant and a PPP loan, you had to deduct the advance from your PPP forgiveness amount. You now no longer have to deduct that amount from forgiveness.

Extender provisions

Many so-called “extender provisions” were set to expire on Dec. 31, 2020; however, the Act renews them through 2025. These include, but are not limited to the:

  • New Markets Tax Credit
  • Exclusion from gross income for discharged mortgage debt on qualified principal residences (though the maximum amount is reduced to $750,000 from $2 million)
  • Employer credit for paid family and medical leave

Some provisions were made permanent by the Act including:

  • Energy-efficient commercial building deduction under section 179D
  • 7.5% adjusted gross income (AGI) threshold for determining the deductibility of individual medical expenses

Other tax provisions

  • Taxpayers can use their earned income from 2019 to determine their earned income tax credit and refundable portion of the child tax credit.
  • For employers that participated in the voluntary tax holiday, the employee portion of the Social Security payroll tax deferral repayment period was extended until December 2021. The original payback period ran through the first four months of 2021.
  • Individuals that do not itemize their deductions can deduct up to $300 in charitable contributions in 2021. Originally, this was solely allowed for 2020 returns. The 100% AGI limit for cash contributions to a qualified charity, which was also set to expire at the end of 2020, is extended through 2021.
  • The payroll tax credits for paid sick and family leave provided by the Families First Coronavirus Response Act are extended through March 31, 2021.

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.