SBA’s Economic Injury Disaster Loan Program Easily Explained and Summarized
There are two types of SBA Loan programs available to small businesses and nonprofits affected by Covid-19 under the CARES Act Fiscal Stimulus Package. The Paycheck Protection Program (PPP) and The SBA’s Economic Injury Disaster Loan. The below summarizes the details of the SBA’s Economic Injury Disaster Loan Program. We will summarize the Paycheck Protection Program (PPP) in another post.
It has been Financing Solutions’ experience that SBA Loans in the past have taken a long time to be approved and paid out. With the number of small businesses applying we believe this will also be the case with the SBA’s Economic Injury Disaster Loan Program.
Financing Solutions’ recommendation is that you do apply for The SBA’s Economic Injury Disaster Loan Program but that you consider setting up a line of credit with Financing Solutions in the meantime. Financing Solutions line of credit program is built for both small businesses and nonprofits with yearly revenues greater then $400,000 and $200,000 respectfully. The Financing Solutions line of credit program costs nothing to get in place, nothing when not being used, and is inexpensive when used. It requires no personal guarantees and no collateral. The Line can be approved in 48-72 hours and is easy to get in place. Financing Solutions is still approving many applications.
SBA’s Economic Injury Disaster Loan Basics
What businesses are eligible to apply?
SBA’s Economic Injury Disaster Loans (or working capital loans) are available to small
businesses, small agricultural cooperatives, small aquaculture businesses and most
private non-profit organizations
• Businesses directly affected by the disaster
• Businesses that offer services directly related to the businesses in the declaration
• Other businesses indirectly related to the industry that are likely to be harmed by
losses in their community (Example: Manufacturer of widgets may be eligible as well
as the wholesaler and retailer of the product.
What are the criteria for loan approval?
Credit History – Applicants must have a credit history acceptable to SBA.
Repayment – SBA must determine that the applicant business has the ability to repay the
Eligibility – The applicant business must be physically located in a declared county and
suffered working capital losses due to the declared disaster, not due to a downturn in the
economy or other reasons.
How much can I borrow?
Eligible entities may qualify for loans up to $2 million.
The interest rates for this disaster are 3.75% for small businesses and 2.75%for nonprofit
organizations with terms up to 30 years.
Eligibility for these working capital loans are based on the size (must be a small business)
and the type of business and its financial resources.
How can I use the loan funds?
These working capital loans may be used to pay fixed debts, payroll, accounts payable,
and other bills that could have been paid had the disaster not occurred. The loans are
not intended to replace lost sales or profits or for expansion.
What are the collateral requirements?
▪ Economic Injury Disaster Loans over $25,000 require collateral.
▪ SBA takes real estate (commercial & residential) as collateral when it is available.
▪ SBA will not decline a loan for lack of collateral but requires borrowers to pledge
what is available.
What are some of the businesses that are ineligible for an Economic Injury Disaster
Agricultural Enterprises -If the primary activity of the business (including its affiliates)
is as defined in Section 18(b)(1) of the Small Business Act, neither the business nor its
affiliates are eligible for EIDL assistance
▪ Religious Organizations
▪ Charitable Organizations
▪ Gambling Concerns – (Ex: Concerns that derive more than 1/3 of their annual gross
revenue from legal gambling activities)
▪ Casinos & Racetracks (Ex: Businesses whose purpose for being is gambling (e.g.,
casinos, racetracks, poker parlors, etc.) are not eligible for EIDL assistance regardless of
1/3 criteria above.
▪ Real estate developers – establishments primarily engaged in subdividing real property
into lots and developing it for resale on their own account.
About the Process
SBA’s Economic Injury Disaster Loan (EIDLs) funds come directly from the U.S. Treasury.
▪ Applicants do not go through a bank to apply. They apply directly to SBA’s Disaster
Assistance Program at disasterloan.sba.gov/ela
▪ There is no cost to apply
▪ There is no obligation to take the loan if offered
▪ The maximum unsecured loan amount is $25,000
▪ Applicants can have an existing SBA Disaster Loan and still qualify for an EIDL for this
disaster, but the loans cannot be consolidated.
SBA’s Customer Service Representatives are ready to serve.
Applicants may apply online using the Electronic Loan Application (ELA) via SBA’s
secure website at https://disasterloan.sba.gov/ela.
Paper loan applications can be downloaded from www.sba.gov/disaster. Completed
applications should be mailed to:
U.S. Small Business Administration
Processing and Disbursement Center
14925 Kingsport Road
Fort Worth, TX 76155
Disaster loan information and application forms may also be obtained by calling the
SBA’s Customer Service Center at 800-659-2955 (800-877-8339 for the deaf and hard-of-hearing) or by sending an email to [email protected]
Assistance from SBA Partners
Free assistance with reconstructing financial records, preparing financial statements,
and submitting the loan application is available from any of SBA’s partners:
1) Small Business Development Centers (SBDCs)
3) Women’s Business Centers (WBC)
For the nearest office, visit: https://www.sba.gov/local-assistance