COVID EIDL Loans for Small Businesses

During President Biden’s recent speech mandating businesses with 100+ employees to require COVID-19 vaccination, he mentioned changes to the COVID EIDL (Economic Injury Disaster Loan) program. If your small business needs additional financial support to help you through the pandemic, here’s what you need to know about these loans.

COVID EIDLs are not Forgivable

Unlike PPP loans, COVID EIDLs are not forgivable. Businesses that would like to apply for loans from both programs may do so, as they are independent of each other.

Maximum COVID EIDL Amount is $2 Million

Before the announcement, COVID EIDL amounts were capped at $500,000. Per President Biden’s speech, employers may soon be approved for an increased loan amount of up to $2 million.

To help prioritize the smallest businesses that may need funds more immediately, loans greater than $500,000 will not be approved until October 8, 2021. However, applicants may want to log into their SBA portal and apply now, as the timeline for receiving funds is 3 weeks for less than $500,000, 6 weeks for more than $500,000, and 9 weeks for a combination of the two. (See the SBA chart for details.)

COVID EIDL Payments are Deferred but Interest Still Accrues

All COVID EIDL payments can be deferred for 24 months, but interest rates of 3.75% for-profit or 2.75% non-profit businesses will begin accruing from the date of the first disbursement. The repayment period for COVID EIDLs is 30 years, although prepayments can be made at any time without penalty.

Businesses Must Qualify for a COVID EIDL

To be eligible for COVID EIDLs, employers must have suffered working capital losses due to the pandemic, be physically located in the U.S., and have fewer than 500 workers. COVID EIDL amounts also require a minimum credit score of at least 570 (or 625 for loans greater than $500,000). And, depending on the loan amount, you may also need to provide collateral and a personal guaranty. See this brief COVID EIDL Program Outline or the SBA’s list of COVID-EIDL-FAQs for details.

COVID EIDLs May Be Used for Most Operating Expenses

Funds from a COVID EIDL may be used for virtually any operating expense, including payroll, equipment purchases, rent/mortgage, and utilities. However, they cannot be used for expanding your business, starting a new business, or paying debts owned by a federal agency.

There May be Fees for Applying for COVID EIDLs

Applicants needing loans of $25,000 or less who apply directly through the SBA will not be charged a fee. However, loans greater than $25,000 will have a $100 fee for filing a lien on the borrower’s business assets. Loans greater than $500,000 will also be responsible for recording the real estate lien and paying any associated fees.

Applications for COVID EIDLs End on December 31, 2021

Eligible businesses can apply for a COVID EIDL loan until December 31, 2021, or until funds are exhausted, whichever comes first.

Where Can I Get More Information about COVID EIDLs?

The SBA published these frequently asked questions (FAQs) to help address specific employer questions. For a more abbreviated version, please see the SBA’s COVID EIDL Program Outline.