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Whether your business was struck by the effects of COVID-19, a flood, or some other disaster, the US Small Business Administration (SBA) can help.
Its Economic Injury Disaster Loans, or EIDL loans, offer working capital to help businesses recover from all kinds of disasters. Best of all, these disaster loans come with super-low interest rates, making them excellent loans for all kinds of businesses.
In this guide, we’ll tell you more about how the EIDL program works and how to submit an EIDL application (for both COVID-19 loans and others) so you can get the disaster assistance your business needs.
As we’ve said, Economic Injury Disaster Loans are a type of working capital offered by the SBA.
Note that EIDL loans are actually just one type of SBA disaster loan. (There are also physical disaster loans, home and personal property disaster loans, and Military Reservists Economic Injury Disaster Loans.) They’re designed specifically to help businesses weather the economic effects of a disaster.
What kind of disasters, you ask? Well, the SBA issues disaster assistance in response to many kinds of disasters, from pandemics to tornadoes to droughts.
And no matter the disaster, your EIDL loan will come with a few big perks (like pretty much all SBA loan options do). You won’t have to pay much in interest, you’ll get a long time to repay your loan, and you won’t have to meet super strict borrower requirements―all of which make EIDL loans ideal for businesses trying to get back on their feet.
But let’s get more specific and talk about specific SBA EIDL loans.
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Since March 2020, the SBA has offered Economic Injury Disaster Loans to businesses affected by the coronavirus pandemic.
This COVID-specific loan program comes with its own rules and rates.
COVID-19 EIDL loans max out at $500,000, which makes them smaller than some other kinds of EIDL loans.
Data effective 4/14/21. At publishing time, pricing is current but subject to change. Offers may not be available in all areas.
These loans come with set interest rates and fees. In this case, that means a 2.75% APR (annual percentage rate) for nonprofits and a 3.75% APR for for-profit businesses. Either way, those rates are very, very low. (For comparison, even the best bank loans often have starting interest rates around 5%.)
Once you’ve been approved for your COVID-19 disaster loan, you get up to 30 years to repay it. Again, that’s a generous repayment term, since many business loans come with terms of 10 years or less.
All that sounds pretty good, right? Well before you submit your loan application, remember that you have to use a COVID-19 EIDL loan on eligible expenses.
An eligible expense would be a cost that you normally could have paid, if only the disaster hadn’t gotten in the way. These costs can include paying debts and everyday operating expenses. If you want more specifics, the SBA offers these expenses as examples:
Still interested in an EIDL loan? Keep in mind that you have to meet a few basic borrower qualifications.
For the most part, these are pretty simple. For example, your business needs to be real, and it needs to have been around before COVID-19. You also need to be a US citizen or permanent resident.
There are some other disqualifying factors though. If you have an open bankruptcy, say, you’ll get rejected. Likewise, felonies and misdemeanors in the last five years can disqualify you. And if you owe child support (more than 60 days delinquent), that will get your application declined too.
You also have to meet some basic credit qualifications. The SBA doesn’t actually list specific credit requirements, though it has noted that the credit score required for EIDL loans is lower than the required score for other kinds of SBA loans. We’ve seen reports that the SBA is accepting scores as low as 570―which means even borrowers with poor credit can qualify.
Finally, depending on how big of a loan you want, you may have to offer up collateral and a personal guarantee. Loans over $25,000 require collateral, and loans over $200,000 require a personal guarantee.
If all that looks good to you, then you can go ahead and submit an EIDL application.
Unlike other types of SBA loans, EIDL loan applications go straight to the SBA itself―not through a lender. You can fill out the SBA form on its website. (Expect it to take around two hours or so.)
Remember, EIDL loan program applications are due by December 31, 2021. We don’t suggest procrastinating, though. SBA loans usually take a long time to get approved and funded, and EIDL loans are no exception.
The SBA says you should expect the EIDL loan funding process to take at least 21 days. The sooner you apply, the sooner you can get your loan.
We’ve told you most of the important details about COVID-specific EIDL loans, but we still need to talk about EIDL advances and grants.
For a while, the SBA was offering advances on EIDL loans. Businesses could get up to $10,000 as an advance grant. You didn’t even have to get approved for the EIDL loan to get your grant (so you could get your emergency grant money fast). And best of all, these EIDL grants didn’t have to be repaid.
Unfortunately, funds have run out for the EIDL Advance program. For most borrowers, there’s no way to get an EIDL grant anymore. Sorry to be the bearer of bad news.
The exception? Some businesses can now get a Targeted EIDL Advance. (This program was created in December 2021.)
These funds go specifically to businesses in low-income communities. And as with prior EIDL grants, you get up to $10,000 as a forgivable advance.
If you qualify for these new targeted EIDL grants, the SBA will reach out to you directly. It’s not something you can apply for.
