Do You Need an Economic Injury Disaster Loan?

Even before the pandemic, the Small Business Administration offered Economic Injury Disaster Loans for "losses not covered by insurance or funding from the Federal Emergency Management Agency (FEMA) for both personal and business" expenses and for "business operating expenses that could have been met had the disaster not occurred."

The SBA has also been offering a special pandemic EIDL "for working capital" and for "normal operating expenses (i.e. continuation of health care benefits, rent, utilities, and fixed debt payments)." Small business owners and qualified agricultural businesses in all U.S. states and territories are currently eligible to apply. Even if you have a PPP loan, you may still be eligible for the EIDL program.

For loans approved starting the week of April 6, the SBA is offering 24 months of economic injury, with a maximum loan amount of $500,000, for approved loans with the following terms:

• 3.75% for businesses (fixed).
• 2.75% for nonprofits (fixed).
• 30 years.
• No prepayment penalties or fees.
• Unlike the PPP loan, this loan is not forgivable.

Loans approved prior to April 7, 2021, for less than $500,000 are likely eligible for an increase based on new loan maximum amounts announced March 24, 2021. Businesses that received a loan subject to the previous loan limit can submit a request for an increase at this time.

Collateral is required for loans over $25,000. The SBA uses a general security agreement (UCC) designating business assets, such as machinery and equipment, furniture, and fixtures, as collateral.

Another option

The SBA has also been offering a Targeted EIDL Advance. This provides businesses in low-income communities with additional funds to ensure small-business continuity, adaptation and resiliency. Advance funds of up to $10,000 will be available to applicants in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to lack of available program funding.

This is not to be confused with the general EIDL Advance, which is no longer available. While active, this program gave advance funds originally calculated based on the number of employees on an applicant's COVID-19 EIDL application: $1,000 per employee, up to a maximum of $10,000.

More about the EIDL program, generally, and the COVID-19 EIDL is available on the SBA website. The SBA has also posted an COVID-19 EIDL FAQ. If you think you're eligible but don't know which program is right for you or have a question about a loan you already have, contact the SBA or a financial professional.