FAQs About SBA EIDL Loans & Targeted Advances For COVID Relief
The economic impact of the COVID-19 pandemic has been harsh, particularly on small businesses. Fortunately, there have been a number of loan and grant programs open to small business owners to offer financial help during these tough times. One major program that has provided businesses with the working capital they need to survive the pandemic is the Small Business Administration’s Economic Injury Disaster Loan program (EIDL).
EIDL loans and forgivable advances have helped business owners around the nation keep their businesses open through the pandemic. If you’re a business owner struggling because of the pandemic, this program may be a good choice for you. In this post, we’ll answer some EIDL FAQs about the loans and advances program, how it’s helping small businesses, and if it’s a viable funding source for your business.
SBA EIDL Loan & Targeted Advance FAQs
An Economic Injury Disaster Loan (EIDL) is a loan program through the Small Business Administration. This program provides long-term, low-interest loans to businesses that have sustained an economic injury due to a disaster. An EIDL provides a business with working capital to fund daily operations to help the business overcome the disaster’s economic impact.
The SBA EIDL is available to businesses that have been impacted by the COVID-19 pandemic. Small businesses, agricultural businesses, and nonprofits may be eligible to receive a low-interest loan provided all SBA requirements are met.
The Targeted EIDL Advance is a grant available to eligible small businesses as part of the COVID-19 stimulus bill signed into law on December 27, 2020. The Targeted EIDL Advance provides grants of up to $10,000 to eligible small businesses impacted by the coronavirus. These funds are disbursed more quickly than EIDL loans and do not have to be repaid.
The Targeted EIDL Advance is available to businesses that previously applied for the EIDL Grant in 2020. Businesses that were not funded or received only partial funding (between $1,000 and $9,000) may receive an Advance. Businesses must also be located in a low-income community and have experienced a decline of at least 30% in revenues to receive the Targeted EIDL Advance.
The Supplemental Targeted EIDL Advance is a grant that’s available to qualified businesses even if they’ve previously received an EIDL loan, EIDL Advance, or EIDL Targeted Advance. Qualifying businesses can receive up to $5,000. The maximum you can receive from all three EIDL Advance programs combined is $15,000.
The EIDL loan is a low-interest, long-term loan that must be repaid over a period of up to 30 years. Businesses impacted by the coronavirus can receive up to six months of working capital through this loan program. Applying for and receiving the loan may take several weeks or longer.
The EIDL Targeted Advance is a grant program designed to provide coronavirus-impacted businesses with fast funding of up to $10,000 to meet immediate business needs. The main difference between an EIDL Targeted Advance vs. a loan is that Advance funds do not have to be repaid.
The 2020 EIDL Advance allowed small businesses facing economic hardships due to COVID-19 to request an advance of up to $10,000 as part of the EIDL loan application process. This funding was a grant that was not required to be repaid and was available to small businesses that met the SBA’s requirements.
The 2021 Targeted EIDL Advance also provides up to $10,000 in funding to eligible small businesses affected by the COVID-19 pandemic. However, this round of funding is only open to applicants that previously applied for the EIDL. During this round of funding, eligible businesses must meet one of these conditions: they either did not receive an advance due to a lack of program funding or did not receive the full $10,000.
Additionally, businesses must also be located in a low-income community to qualify for a Targeted EIDL Advance. Qualifying businesses must also show a reduction in income of at least 30%.
The SBA will contact businesses that are eligible to receive the Targeted EIDL Advance. No additional borrower application is required at this time.
Your EIDL loan and advance can be used for a variety of business purposes. Funds are to be used to cover your business’s day-to-day expenses. Your loan or advance can be used as working capital to cover a number of business expenses, including but not limited to payroll and benefits, utilities, rent, and fixed debt payments. There are a handful of restrictions surrounding how EIDL funds are spent. You can’t use funds for dividends or bonuses, expanding facilities, relocating, or acquiring fixed assets.
One thing to note is that there is are further restrictions if you have received a loan through the Paycheck Protection Program (PPP). If you have a PPP loan, “double-dipping” is not allowed if you also have an EIDL loan or advance. That means you can’t use the funds from your PPP and EIDL for the same purpose. For example, if you use your PPP funds to cover payroll expenses, you can’t use your EIDL for those same payroll expenses.
Unsure of how to spend your EIDL funds? Check out all the ways you can (and can’t) spend your loan.
Since EIDL loans go directly through the SBA rather than a lender, there’s no requirement to have a business checking account. However, some applicants have reported issues where there was a mismatch in information between their personal bank accounts and the information they gave to the SBA.
According to the SBA, an applicant may be declined for an EIDL loan based on “unsatisfactory credit history,” so you should assume that they’ll be looking at your credit. That said, there’s no specific credit score that’s cited as a minimum.
Given that you’re dealing with an overburned, slow-moving government organization, we highly recommend you double- and triple-check your applications for errors before submitting them.
If you have made an error, you’ll need to get in touch with the SBA. First, you’ll want to check on the status of your application (see below). You’ll then want to contact the SBA’s Disaster Assistance Processing and Disbursement Center. Explain your situation to them by phone or email. Bear in mind that you may have to be persistent and patient given the volumes of applicants the SBA is dealing with.
There are a few ways to check the status of your EIDL application including by phone, email, and through the SBA’s Economic Injury Disaster Portal or SBA Assistant. If you mailed your application the old-fashioned way, you should contact the SBA by phone, as you won’t have a username and password for the online tools.
If you’re a business owner that has suffered economic hardship as the result of a disaster, you may qualify for an EIDL loan. This includes businesses affected by the coronavirus pandemic. Small businesses, agricultural businesses, and nonprofits may be qualified if SBA requirements are met.
Businesses must meet the SBA’s size requirements to receive an EIDL. Typically, this means that the business must have 500 or fewer employees. Businesses in certain industries, such as government-owned businesses or businesses engaged in illegal activities, will not qualify.
There are no specific credit score requirements, but a borrower must have a solid credit score and history to qualify. Additionally, borrowers must show that they have the ability to repay the loan. If you’re considering the EIDL, learn more about borrower requirements and what to expect during the application process.
The Targeted EIDL Advance is a program that launched following the passage of the Consolidated Appropriations Act in December 2020. Under this law, additional funds were allotted to provide EIDL advances to qualifying small businesses.
To qualify for the Targeted EIDL Advance, you must have submitted an application during the first round of EIDL advance funding. Your business must also be in a low-income community (more on that later), and you must demonstrate that your revenue was reduced by at least 30% during any eight-week period on or before March 2, 2020.
The SBA will first provide grant funding to eligible applicants that received a partial EIDL Advance of $1,000 to $9,000. Next, the SBA will provide grants to eligible businesses that submitted an EIDL application but did not receive an Advance due to a lack of program funding. In addition to the other requirements, these applicants must also have 300 or fewer employees to qualify. Find out how the Targeted EIDL Advance works and if you qualify.
A business must be located in a low-income community to receive an EIDL Advance. A low-income community is an area that has a poverty rate of 20% or more. Rural businesses must have a median family income of 80% or less of the statewide median family income. Businesses in suburban and urban areas must have a median family income of 80% or less of the metropolitan area’s median family income.
To determine if you’re in a low-income community, you will use census data. One of the easiest ways to determine if you qualify for an EIDL Advance is to use the Federal Financial Institutions Examination Council’s geomap tool. Learn more about using this tool and qualifying for the EIDL advance.
Technically, no, but some businesses have reported otherwise. The SBA now has their own tool you can use to see if your community is eligible. The convenient thing about the Targeted EIDL Advance is that it’s by invitation only. If the SBA invites you to get a Targeted EIDL Advance, then there’s a decent chance you’ll qualify for one. If not, you won’t be able to get one.
If you received an invitation from the SBA and subsequently applied, you can check the status of your Targeted EIDL Advance through the SBA’s Economic Injury Disaster Portal.
If you previously applied for the EIDL and were denied, you may submit a reconsideration request up to six months after applying.
If you received an EIDL and need additional funding, you may be eligible to modify your loan and receive an increased amount.
If you own multiple businesses, you may submit an EIDL application for each eligible business.
Finally, if you applied for the EIDL Advance in 2020 and were unable to receive one due to a lack of program funding, you may now be eligible to receive funding. However, you do not need to submit a second application. Instead, the SBA will contact you regarding eligibility.
Most EIDL applicants will receive a funding decision within 21 days. If you’re approved, you should get a disbursement within a week of approval. You can read more about the process in our SBA EIDL Funding Timeline: What To Expect During Application, Approval, & Processing.
EIDL loan forgiveness is not an available option, so you will need to repay it in full. Fortunately, though, repayment terms are extremely favorable — up to 30 years at a fixed APR of 3.75%. You won’t find those kinds of terms with just any lender.
If you received an EIDL Advance or Targeted Advance, these are grants and are forgivable. In other words, if used properly, these funds do not have to be repaid.
Both death and illness are circumstances that could lead to you defaulting on your EIDL loan. Debt obligations may vary depending on how much you’ve taken out, whether you’ve signed a personal guarantee, and any available business assets that the SBA could liquidate to cover the debt.
When dealing with settling estates, it’s best to speak to a lawyer about your options and speak to the SBA about any possible deferments or relief.
Neither EIDL loans nor EIDL Advances are considered taxable business income. Additionally, qualified expenses that are paid for with EIDL funds can still be written off your taxes.
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