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Any American business impacted by a declared disaster can apply for a Economic Injury Disaster Loans (EIDL) program. EIDL loans become available if a business exists in a county impacted by a declared disaster or a contiguous county. Examples of disasters include weather events, wildfires, droughts, explosions, and terrorist attacks.
These disaster loans are declared by the federal government.
In response to the unprecedented crisis wrought by the coronavirus pandemic, the federal government expanded financing support for small businesses through the COVID-19 Economic Injury Disaster Loans (EIDL) program. Though the government stopped accepting loan applications as of January 1, 2022, small businesses still can modify their existing loans. Small business owners can also appeal an EIDL rejection if the rejection occurred within 6 months.
An EIDL is a long-running lending program offered through the Small Business Administration (SBA). EIDLs are reserved specifically for disaster relief.
Previously known for strict requirements and long wait times before disbursement, the program kicked into high gear in response to the COVID-19 pandemic. The CARES Act of 2020 opened the EIDL program to any business impacted by the pandemic or related lockdowns, but the deadline for new EIDL applications was January 1, 2022. As of March 2022, the government continues to process and decide on EIDL applications as long as they were received by this deadline.
EIDL is set aside for small businesses or private nonprofit organizations that suffer a large economic injury due to a declared disaster. The applicant’s business does not have to sustain physical damage to qualify.
For EIDL qualification, a small business is defined as an operation with 500 or fewer employees. Sole proprietorships and independent contractors are eligible small businesses.
Applicants must prove their small business sustained economic injury and that the business is located in either a disaster-declared county or a contiguous county.
While a small business that suffered economic injury related to the COVID-19 pandemic cannot submit new applications as of 2022, existing loan applications and rejection appeals can be modified in some circumstances.
Recent research suggests there is still $115 billion in untapped COVID-19 EIDL funds. Small businesses cannot apply for new COVID-19 SBA disaster loans, but those with existing applications might be able to access these loans in 2 sets of circumstances.
If you already are a COVID EIDL borrower and you want to increase your loan, you can request to increase your loan amount through the COVID EIDL portal.
If you are an existing COVID EIDL borrower and are seeking an increase, you may request more funds up to your maximum eligible loan amount in the COVID EIDL portal. If you submitted your application by the January 1, 2022, deadline but haven’t yet received your loan, you can also request an increase.
If you were rejected for a COVID EIDL loan, you have 6 months to request reconsideration of your application, even into 2022. However, if the total EIDL funds are exhausted before these 6 months elapse, your reconsideration will not be fulfilled. The SBA says that rejected applicants should follow the instructions on their decline letter to learn how to submit a request for reconsideration.
EIDLs are popular with businesses that experienced an unexpected disaster because the interest rates are low and there are no upfront fees or early payment penalties.
As of April 2022, the maximum loan available through the EIDL program is $2 million. The loan amount is based on how much economic injury a business sustained due to a disaster.
The maximum loan repayment period is 30 years, and the repayment frequency can vary based on each business’s ability to repay the loan.
The interest rate for an EIDL loan to most small businesses cannot exceed 4% based on current law as of April 2022. The COVID EIDL interest rate was set at 3.75%.
These loans offer support for small businesses and help them stay operational during disaster-induced hardships. Use these funds to cover the necessary day-to-day expenses that your business would have successfully covered before the coronavirus or other disasters impacted your finances. Examples include:
You can apply for an EIDL on the SBA website.
Marketplace lending facilitators like Lendio do not service EIDL because the program is run through the SBA. However, small business owners who are interested in financing with quick approval times should consider non-EIDL options.
Assuming that Congress does not pass new legislation further expanding the program, the COVID EIDL loan program appears to be over as of 2022. The overall EIDL program for other disasters remains a program through the SBA.
The best way to submit an EIDL application is through the SBA website.
Along with the application, small businesses will need to prepare documentation that includes:
The SBA says that the time it takes to process EIDL applications depends on volume. Generally, the SBA will render a decision on an EIDL application within 21 business days. At this point, an assigned loan officer might request additional documentation or notify a small business that its application was approved. If the business owner accepts the EIDL terms, disbursement of funds generally occurs within 3–5 business days.
Learn more at SBA Disaster Loan.
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