What is an Economic Injury Disaster Loan? This is a question small businesses have been asking because of the COVID-19 pandemic. We’ll provide an overview of an EIDL Loan and highlight some of the benefits it offers. If you’re thinking about applying for one, keep reading. We’ll discuss who’s eligible, what can it be used for, and more. Let’s get started!
What is an Economic Injury Disaster Loan (EIDL)?
EIDL assistance is available in the form of an Economic Injury Disaster Loan (EIDL) and EIDL Advance. EIDLs are working capital loans that can provide up to $2 million to small businesses and nonprofit organizations to help alleviate the financial impacts of a disaster.
The EIDL program is primarily designed to help businesses recover from the short-term effects of a disaster, like substantial economic injury or property damage. EIDLs are administered by the Small Business Administration (SBA) and are subject to credit approval.
How Does an EIDL Loan Work?
The amount of the disaster assistance loan is based on the applicant’s financial obligations, which include accounts payable, inventory, and other debts that can’t be paid as a result of the disaster. The terms are based on the applicant’s ability to repay the disaster loan.
There are several benefits of an EIDL loan, including having a lower interest rate than many other types of loans, no collateral being required, and the loan can be repaid over a longer period than many other types of loans.
Who is Eligible?
Declared disaster assistance is available to small businesses, small agricultural cooperatives, small aquaculture businesses, and most private nonprofit organizations located in a disaster area.
To be eligible for an Economic Injury Disaster Loan, the business must have suffered substantial economic injury as a result of the disaster, be located in a declared disaster area, have a credit history that indicates the business is reasonably likely to repay the loan and be unable to obtain credit elsewhere.
What Can it Be Used For?
An EIDL loan can be used for a wide range of purposes, including payroll support, sick or family leave, mortgage or lease payments, and utility payments. The loan amount you receive is based on your estimated economic injury and financial needs, which will be determined by the Small Business Administration (SBA).
What Can it Not be Used For?
EIDL loans cannot be used for certain purposes, such as refinancing long-term debt or expanding your business. Additionally, EIDL loans can’t be used to pay dividends or salaries to owners, partners, or shareholders of the business.
How to Get an EIDL Loan
To get an EIDL loan, you must first contact the Small Business Administration (SBA) to determine eligibility and apply for a loan. Next, you’ll complete the application, which will include providing information on your business and its financial needs. After that, a loan officer will review your application and determine the loan amount you are eligible for. Once approved, you will receive the loan in a lump sum.
READ MORE: Small Business Loan Requirements
The Best Small Business Economic Injury Disaster Loans in 2022
If your business is struggling in these tough economic times, you’re not alone. Thankfully, EIDLs are available to help businesses get back on their feet. Here are the best loans for small businesses in 2022.
1. Small Business Administration EIDL
The SBA EIDL is a government-backed loan that provides low-interest, long-term disaster relief financing to small businesses and nonprofits that have been adversely impacted by a declared disaster.
2. Rapid Finance
To be eligible for a small business EIDL loan from Rapid Finance, you must also have a minimum credit score of 550, your business must have been in operation for 2 or more years, and have monthly revenue of at least $10,000.
You must be in business for at least one year and have a minimum monthly revenue of $3,000 to qualify for a small business EIDL loan. Kabbage also requires a minimum credit score of 640.
Lendio is a small business lender that offers EIDL loans to businesses that have been in operation for at least six months, have a minimum monthly revenue of $4,000, and have a minimum credit score of 580.
To qualify for a small business EIDL loan from OnDeck, your business must have been in operation for at least one year and have a minimum monthly revenue of $8.5K. Your credit score must also be at least 600.
To qualify for a small business EIDL loan with Fundera, your business must have been in operation for at least one year and have a monthly revenue of at least $16,000. Your credit score must also be at least 620.
7. Big Think Capital
To qualify for a small business EIDL loan, your business must have been in operation for at least six months and have monthly revenue of at least $8,000. You must also have a minimum credit score of 500.
How much can I borrow with an EIDL loan and what are the interest rates/terms/conditions attached to it, etc.?
The Small Business Administration (SBA) offers disaster assistance in the form of Economic Injury Disaster Loans (EIDLs) to small businesses impacted by disasters. The SBA can provide up to $500,000 with an interest rate of no more than 4% and terms up to 30 years. There is no pre-payment penalty or fees.
How long do I have to repay my EIDL loan and what are the repayment options available to me if I can’t afford the monthly payments, etc.?
EIDL loans cannot be forgiven. The good news is that the first payment due date has been extended from 12 months to 24 months from the date of the note. There is also a deferment period during which full or partial payments can be made (but are not required). It can be deferred up to 30 months from the date of the note. However, interest will continue to accrue during the deferment period.
What is the maximum loan amount that can be borrowed through an EIDL loan from the Small Business Administration?
The maximum loan amount for an SBA EIDL is $500,000. However, businesses may qualify for an EIDL and a physical disaster loan. If the business qualifies for both, the business owner would receive up to $2 million in assistance.
How long does the EIDL loan take to process?
After you apply for an EIDL loan, a decision will be made on your application usually within 21 days. If approved, you could receive your disbursement within five business days.
Can I still apply for COVID-19 EIDL assistance?
Unfortunately, as of January 1, 2022, the SBA is no longer accepting new applications for COVID-19 EIDL loans, increase requests, or reconsideration. The Targeted EIDL Advance and Supplemental Targeted Advance are also closed.
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