Note: The following description is valid through April 9, 2020. We will update this description as events warrant.
COVID-19 Economic Injury Disaster Loans (EIDL) and Emergency EIDL Advances
In a Nutshell – The CARES Act expands SBA’s EIDL program to make $10 billion available for emergency EIDL advances and loans to eligible borrowers that have suffered substantial economic injury caused by the COVID-19 emergency. This specifically includes lending to eligible small businesses with 500 or fewer employees.
Authority – Title I, Sec. 1110, of the CARES Act, Sec. 1110, H.R. 748, Pub. L. 116-136, March 27, 2020.
Rules – No rules have been forthcoming yet specifically for these new provisions, and it is unclear whether any may be expected.
How Funds Can Be Used – Advances and loan proceeds may be used, in addition to the uses allowed by Section 7(b)(2) of the Small Business Act, for:
- Providing paid sick leave to employees unable to work due to the direct effect of the COVID–19 emergency;
- Maintaining payroll to retain employees during business disruptions or substantial slowdowns;
- Meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;
- Making rent or mortgage payments; and
- Repaying obligations that cannot be met due to revenue losses.
Who is Eligible – Any business with not more than 500 employees, any individual who operates a sole proprietorship or an independent contractor, a cooperative, employee stock ownership plan, or a tribal business concern with 500 or fewer employees, private nonprofit organization, or small agricultural cooperative, that was operating on Jan. 31, 2020. The applicant must also have suffered a substantial economic injury and be located in a presidentially-declared disaster area.
SBA may approve applicants for a loan based solely on the applicant’s credit score, and no tax returns or tax transcript are required. Appropriate alternative methods (which are not yet defined) may also be used to determine an applicant’s ability to repay the loan.
Maximum Loan Amount – Maximum EIDL loan is $2 million. Loan amount is based on the applicant’s actual economic injury as determined by SBA, less any recoveries such as insurance proceeds. This cap may be waived, however, if an applicant’s business is a “major source of employment” in the area, as defined by 13 C.F.R. § 123.202.
Available Emergency Advances – An eligible business that applies for these loans may request an advance in a maximum amount of $10,000. Advances need not be repaid even if the applicant is subsequently denied a loan under the program.
Period of Availability – Until December 31, 2020, unless funds are exhausted.
Loan Term/Interest Rate/Repayment/Forgiveness – Maturity for an EIDL loan is up to 30 years, and is determined on a case-by-case basis, based on the borrower’s ability to repay. Interest for a COVID-19 related EIDL loan is 3.75% for businesses and 2.75% for nonprofits. Repayment on a COVID-19 related EIDL loan is deferred for 1 year.
Other Limitations – An EIDL loan cannot be used for the same purpose as an SBA Payroll Protection Program (PPP) loan.
Additional Information – A COVID-19 related EIDL does not require a personal guarantee for loans of $200,000 or less, and borrowers are not required to state they could not get credit elsewhere. Applicants may request that an emergency EIDL advance be available within 3 days of application. Applicants should review existing SBA EIDL provisions to ascertain other requirements that may apply.
Where Can We Apply for a COVID-19 EIDL loan and Emergency EIDL Advance – Loans and emergency advances will be available from SBA.
Other SBA Programs
SBA also has certain other programs you may consider exploring, such as debt relief and express bridge loans. Information about these programs can be found on SBA’s website.