SBA Reopens Economic Injury Disaster Loans to Small Businesses, Independent Contractors
The SBA is reopening its EIDL program to allow for a broader range of businesses to apply
The Small Business Administration (SBA) announced its reopening its Economic Injury Disaster Loans along with the EIDL advance grant portal. The loan program is now available to more small businesses that have been impacted by the COVID-19 pandemic.
The reopened portal allows SMBs to apply for Economic Injury Disaster Loans in addition to advance up to $10,000, which will be provided free of charge regardless of whether the final loan is approved or not. The loans will be made at 3.75%, deferrable for the first year and with a repayment span of up to 30 years.
EIDL loans can be used for expenses outside the Payroll Protection Program (PPP), which should be used primarily for employee wages. All the funds received from EIDL loans can be used for other costs of operation, including supplies, rent, and utilities. Whether or not the loan is approved, all businesses are eligible for up to $10,000 in an advance payment.
Who is my business eligible for EIDL?
The EIDL program was originally slated for agriculture businesses, but the SBA’s announcement opens the program to all small businesses and non-profits in any industry that have been impacted by the pandemic. The agency has upgraded its portal and application process to better meet demand and need for emergency assistance.
The SBA defines an eligible business as any company with less than 500 employees, including sole proprietorships, self-employed businesses, and independent contractors. Private, non-profit, and veteran organizations also meet the SBA’s criteria if the businesses have been negatively impacted by COVID-19.
Businesses in some industries with more than 500 employees may meet the SBA size requirements if they meet certain requirements. The SBA offers a Size Standards Tool, to determine if your business will meet loan and advance requirements for employers with more than 500 staff members.
What’s changed with EIDL?
The EIDL program has been revamped to provide businesses with up to $150,000 per entity. The original program allowed loans up to $2 million, but the number was reduced to meet demand. The original $10,000 advance per business was also adjusted to $1,000 per employee, per business, up to 10 staff members.
With the focus originally on agri-business, the EIDL has been less well-known than the other assistance programs provided through the CARES Act and the PPP. With more funds available to businesses outside the agricultural industry, additional funding has been made available.
The SBA announced it has processed almost $1.5 million in loans totaling nearly $100 billion in funds to small- and medium-sized businesses under these programs.
The EIDL fine print
The program’s long-term, low interest loans are available to small businesses and non-profits. The loans will be made at 3.75% interest and are deferrable for the first year. For non-profits, the interest rate is 2.75%. Repayment plans can span up to 30 years.
The $10,000 advance is earmarked for emergency economic relief and will be awarded to businesses at the rate of $1,000 per employee, per business, up to 10 total. These funds do not have to be repaid and will be provided whether or not the loan is ultimately approved by the SBA.
The advances are slated to provide emergency economic relief to businesses who are experiencing a temporary loss of revenue due to government mandated shutdowns or economic slowdowns that have resulted from the COVID-19 pandemic.
Credit history may be a factor
The SBA doesn’t identify specific credit thresholds they consider worthy of loans, but some information they provide gives guidance.
They write:
“For disaster lending purposes, satisfactory credit history is defined as a history that generally shows payments to creditors as agreed unless otherwise justified…
Generally, a history that consists of minor, isolated instances of adverse credit or late payments is acceptable. Major instances of adverse credit such as unpaid judgments, repossessions, previous foreclosures, charge-offs, and unpaid collections can be overcome provided:
- The applicant explains the lapse; and
- The applicant has other accounts with “as agreed” payment records.”
Under the SBA’s guidelines, medical collections are not considered adverse credit information. Charged off accounts and non-medical collections of $10,000 or less; or foreclosures or deed-in lieu of foreclosures that happened more than 2 years before the date of the loan application do not disqualify a loan application either. These are considered by the agency “an acceptable credit risk and do not require any additional justification.”
The SBA hasn’t listed a deadline for applications, but SMBs should apply for loans and assistance as soon as possible. The application is available on the SMB website and provides guidance on who is eligible and what documentation will be necessary.
