How to Apply for Small Business Coronavirus Disaster Relief Loans

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Donald Trump on March 27, 2020, and includes changes to existing Small Business Administration (SBA) disaster relief loans aimed at helping small businesses stay afloat amid the uncertainty of the coronavirus (COVID-19) pandemic. Historically, the primary form of disaster relief for small businesses are Economic Injury Disaster Loans (EIDLs), and the program’s eligibility requirements & other limitations have been loosened by the CARES Act.

What businesses are eligible for coronavirus EIDLs?

• Small businesses with fewer than 500 employees or that otherwise meet the SBA’s size guidelines for their industry, including non-profits, cooperatives, tribal businesses, employee-owned small businesses, and individuals operating as sole proprietors or independent contractors.
• The small business must not be able to access credit elsewhere.
• The small business must have a physical presence in a state or U.S. territory that is subject to an economic assistance disaster declaration from the SBA. Currently, small businesses in all U.S. states and territories are eligible for EIDLs because of coronavirus.
• EIDLs can be approved by the SBA based solely on an applicant’s credit score.

How do EIDLs work?

• EIDLs provide up to $2 million in assistance that may be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the disaster’s impact.
• The interest rate for small businesses on EIDLs is 3.75%, while the interest rate for non-profits is 2.75%.
• EIDLs can have long-term repayments up to a maximum of 30 years. Terms are determined on a case-by-case basis relative to the borrowers’ ability to repay the loan.
• Because of the coronavirus pandemic, small businesses in all U.S. states, territories, and D.C. can apply for an EIDL advance of up to $10,000 that doesn’t have to be repaid.
• EIDLs smaller than $200,000 can be approved without a personal guarantee.
• EIDLs over $25,000 require collateral, including real estate. The SBA won’t decline a loan for lack of collateral.
• The SBA is required to pay all principal, interest, and fees for six months on existing SBA loan products like the EIDL.

Who provides EIDLs?

• Small businesses can apply for EIDLs directly through the SBA.
• The SBA EIDL application is available here.
• The EIDL advance application is available here.

Can businesses receive both EIDLs and Paycheck Protection Program loans?

• Yes, small businesses can receive both EIDLs and Paycheck Protection Program loans as long as they don’t pay for the same expenses.
• The $10,000 EIDL advance grant award would be subtracted from Paycheck Protection Program loan amounts eligible for forgiveness.
• If the EIDL isn’t related to coronavirus, the borrower wouldn’t be able to refinance the EIDL into the Paycheck Protection Program loan.

RESOURCES

• SBA Coronavirus Disaster Assistance Resources
• SBA EIDL Loan Application
• SBA EIDL Loan Advance Application
• U.S. Chamber of Commerce Guide to SBA Disaster Relief Loans

— Eric Revell

(Photo Credit: iStock.com / Bill Oxford)