The US government passed a historic $2 trillion stimulus, earmarking $350 billion for small business funding in The Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Within the CARES Act, there are 2 loan programs to support small businesses—the Paycheck Protection Program (PPP) and Economic Injury and Disaster Loans (EIDL).
What Is an SBA Economic Injury Disaster Loan?
The SBA Economic Injury Disaster Loan (EIDL) provides small businesses with up to $2 million in capital to support them through this economic crisis. The SBA plans to work directly with state governors to identify and offer relief to small businesses and nonprofits hit hardest by the COVID-19 crisis.
The whole purpose of this loan is to help your business stay afloat until normal operations can resume. Use your EIDL to pay your business debts, make payroll, and get your business back on track.
SBA small business loans are typically one of the most sought-after small business loans. With large loan amounts, incredibly low interest rates, and flexible repayment terms, it’s not hard to imagine why. Close to 95% of the $367 billion earmarked for small businesses in the stimulus package is dedicated to the SBA, making the once extremely competitive SBA loan a much more realistic option.
Characteristics of an SBA Economic Injury Disaster Loan:
- Loan amounts up to $2 million
- 3.75% interest rates for small businesses and 2.75% interest rates for nonprofits
- Long-term repayments up to a maximum of 30 years
- Unlike your typical SBA loan (which is funded from a bank loan), capital from an EIDL comes directly from the US Treasury
While the government’s notorious for painfully long processes and mountains of paperwork, they’re kicking things into high gear to get businesses the money they need—fast. Well, fast for approving billions of dollars to businesses across all 3.8 million square miles of our country, at least.
However, if you need immediate cash, don’t panic! Small businesses eligible to apply for the government’s COVID-19 small business loan will be able to access up to $10,000 within 3 days (without having to make a payment) even if the government denies their disaster loan application.
Which leads to the question: who exactly is eligible to apply for an SBA Economic Injury Disaster Loan?
Who Is Eligible for a COVID-19 Small Business Disaster Loan?
To qualify, you’ll need to meet a few criteria:
- Be a US business (in any state or territory)
- Have fewer than 500 employees
- Prove financial need caused by coronavirus pandemic
Simple, right? Normally, you’d need to provide collateral, but the SBA is waiving that requirement for the time being. Since this is a loan, you’ll still need good credit to prove you can repay the funds.
How to Apply for a Coronavirus SBA Small Business Disaster Loan
Below is the step-by-step process for applying for an SBA EIDL:
- Visit the SBA’s Economic Injury Disaster Loan Assistance page.
- Download the forms on the page:
- Business Loan Application (Form 5)
- Home or Sole Proprietor Loan Application (SBA Form 5C)
- Economic Injury Disaster Loan Supporting Information (Form P-019)
- Fill in all the necessary information on the forms.
- Submit the forms on the bottom of the page under “Upload Business Forms.”
And that’s it. It’ll probably take at least 2–3 weeks to get approved, and then you’ll receive an up-front $25,000 disbursement within 5 days. After that, you’ll receive the rest of the loan on an agreed-upon schedule.
You should at least apply for a COVID-19 SBA small business loan, even if you don’t think you’ll need one. The small business landscape is changing every hour of every day—we have no idea what to expect from the virus or responding to government regulations. The entire approval and funding process can take close to a month, so it’s best to get ahead of the game just in case you do need one soon.
There’s no fee to apply, and you won’t suffer any penalties if you’re approved and decide to decline—so you have nothing to lose.
Get Your Business Back on Track with an SBA Small Business Disaster Loan
The whole economy is turned upside down right now—there’s no shame in getting some much-needed financial assistance. It takes a little capital to make big things happen, and SBA COVID-19 small business loans provide more than just a little cash. Apply for yours today and get your small business back on track.
Oh, and if you’d like help with your SBA loan application, give our team a call at (855) 853-6346. We can help answer all your questions and make the process as simple as possible. And while you’re waiting on your SBA loan, check out the Lendio blog for up-to-date posts on operating amidst the COVID-19 crisis.