Can My Economic Injury Disaster Loan (EIDL) & Emergency Advance For Coronavirus Relief Be Forgiven?
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Expert Analyst & Reviewer
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The COVID-19 pandemic has riddled the US with both a health crisis and an economic one. Small businesses have been particularly affected — according to the National Federation of Independent Business, 92% of small employers have been negatively impacted by the novel coronavirus.
In response to the woes facing the economy, the US government has allocated funds to help support businesses throughout the country by enacting the $2 trillion CARES Act. One of the programs for small businesses affected by this act is the Economic Injury Disaster Loan (EIDL) program.
As the EIDL’s name might imply, this program involves small businesses taking out a loan. In general, loans must be paid off over time with interest. Being saddled with interest rates and having to repay loans can create additional headaches for any small business owner.
Thankfully, at least part of the money involved with an EIDL may not need to be repaid. If you’ve requested and received an emergency advance as part of the EIDL program, that money can be forgiven. Read through for the full details on how you can receive forgiveness on your EIDL emergency advance.
Table of Contents
Can EIDL Loans & Grants Be Forgiven?
There are two parts to the current EIDL program: loans and grants. The loan — which can be as high as $2 million — is generally not forgivable. You’ll need to repay an EIDL loan. There is also one exception to the main loan to keep in mind. If you received an EIDL between January 31, 2020, and April 3, 2020, and you apply for a forgivable Paycheck Protection Program Loan and then refinance your EIDL into the PPP, you can essentially have your EIDL forgiven. Note that if you didn’t receive your EIDL before April 3, this exception doesn’t apply to you.
The grants, on the other hand, is a different story.
The new EIDL grants are a reworking of the EIDL advance that was offered in 2020. Like the advance, the new grants offer $1,000 your way for every employee in your business and caps its limit at $10,000. You do not need to repay the grant. That means you’ll be able to put the money right into your business without needing to pay it off in the future.
However, there are additional restrictions on who can get the EIDL grants this time around.
- You have to have been in business before January 31, 2020
- You have less than 300 employees
- You’ve suffered a 30% or greater loss of revenue during any 8-week period between March 2, 2020 and December 2021 compared to the same period in 2019
- Your community is considered low-income
You can get the grant even if you previously received one so long as you didn’t get the full $10,000, in which case you can receive up to a combined $10,000 from both grants.
How To Get Forgiveness On Your EIDL Emergency Advance
As a grant, the EIDL Advance doesn’t need to be actively forgiven. If you qualify for one and receive one, you don’t have to pay it back.
New to the 2021 version of the EIDL grant: it no longer counts against the amount of money you can get forgiven from a PPP loan. Additionally, the grant is not considered gross income for tax purposes.
EIDL Repayment Terms
Because you do have to repay the main portion of your EIDL, you’re probably wondering what repayment terms you might receive. As for this portion of your EIDL, the SBA states that the interest rate will not exceed 4% per year (the current rate is 3.75%), and the term length will not exceed 30 years. Your exact repayment term length will depend on your ability to repay your loan.
These are unquestionably favorable repayment terms, which makes the EIDL program very valuable if you can get approved for a loan.
Additionally, disaster loans in “regular servicing” status on March 1, 2020, will have automatic deferments provided through December 31, 2020, according to the SBA. If your loan falls under this status, it may provide you with additional relief during the economic downturn caused by the coronavirus pandemic.
Also, remember that because the advance does not need to be repaid, you won’t need to worry about any interest rates or term lengths with that portion of your loan. This means that when estimating the cost of an EIDL, you should first subtract the amount the SBA advanced to your business from the overall loan before calculating the cost.
More About COVID Relief Funding
If you need more help beyond an EIDL or emergency advance, Merchant Maverick has been working hard to lend a helping hand.
Visit our frequently-updated coronavirus hub for a slew of guides and resources to help your business through this turbulent time. You might be particularly interested in understanding the difference between EIDL and PPP Loans.
With the new round of PPP approved, you may also want to learn about the differences between Round 1 and Round 2 of the PPP program. If your business is a live venue that’s been hit hard by the pandemic, you may want to consider a shuttered venue grant.
Chris Motola
Expert Analyst & Reviewer at Merchant Maverick
An expert in personal and business loans and financial health, Chris Motola has been writing about small business finance and payments for over 5 years. He has been cited in various industry publications, including Forbes Advisor, GoBankingRates, and Medium. Chris is a graduate of the University of Central Florida.
View Chris Motola's professional experience on LinkedIn.
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Hello where do you apply for a EIDL loan forgiveness or for the grant is there a link?
Thank you
Hi Dee,
You’ll need to repay the loan unless you meet the specific requirements we discuss in the first section of the post Can EIDL Loans & Grants Be Forgiven?. You can review the second section in the post How To Get Forgiveness On Your EIDL Emergency Advance for an explanation on how grant forgiveness works. But in short, you shouldn’t need to do anything, as it’s automatically forgiven. Hope that helps!
I used part of the the EIDL for payroll for the first few months of COVID. Is the Tax portion of that still due since it essentially went back to the federal and state government? (put simply, is there forgiveness for the amount used to pay taxes?)
Hi Joe!
Your business will still be responsible for your portion of employment taxes, even if payroll was covered by the EIDL or EIDL Advance. For specific advice, I’d recommend speaking with an accountant, who can also keep you updated on any tax deductions and credits that may be beneficial for your business. Good luck!
I received an EDIL Loan under $150,000.00 no personal signature, but there is a lien on my fixtures and inventory. I have struggled to kept the restaurant going. I can’t find employees, price of food has gone up, I have had to close one day a week because I don’t have enough employees. My head cook is leaving the end of September and I hired someone to take her place and now he has quit. I haven’t been able to find another cook and am running out of time. I will have to close without a cook. I don’t know where I stand and what to do. Any advise?
Hi Karen!
I’m sorry to hear about the struggles that your business has been facing. You’re certainly not alone, as restaurants across the nation are facing employee shortages, high turnover rates, and financial burdens. I’d recommend checking out our post 10 Ways To Reduce Your Restaurant Turnover Rate, which could give you some ideas as to how to bring in new employees, such as offering a hiring bonus.
You can also look into additional financial resources to help keep your business afloat. This includes small business grants, loans, and credit cards. Before seeking more funding, though, I would recommend taking a hard look at your finances to determine if this is the right course for your business. You can also see if there are ways to cut costs within your business (i.e., shop around for other suppliers or trim down your menu.) Whatever you decide to do, we here at Merchant Maverick wish you the best of luck!
Hello Dan,
My husband and own a small LLC Series company that was organized for our handful of rental properties in 2010. The rental condos are located in a low income zip code. The physical business suite is not located in a low income zip.
The LLC received a $20,000 EIDL loan in 2021 for loss of rent dollars. My understanding is that if the LLC business was located in a low income zip that it could qualify for $10,000 of the EIDL loan to be forgiven or basically turned into a grant. Do you agree? If this is true, could we legally change the physical business address at this point and move it to the low income zip?
Hi PVT,
There’s not much SBA guidance explicitly addressing this, but we’ve seen property owners in this situation say they were able to get approved for a Targeted EIDL grant by showing that they owned and operated a property within a qualifying zip code. It’s probably worth applying. The worst that will happen is you’ll be rejected. Good luck!
Good article.
My brother in law received an EIDL loan in April of 2020. He was the sole member of the LLC. There are no other employees. Essentially he was the business. There is about half of the proceeds of the loan in the business bank account and some office furniture. Very little receivable and negligible payables.
He passed away about 2 months ago. As the assets are probably insufficient to repay the demand from the SBA for repayment, is there a mechanism where the LLC can get out from under the loan at least in part. Is Chapter 7 filing the correct way to go?
Hi Russ,
I’m so sorry for your loss… This is a bit of a tricky situation. Debt obligations may vary depending on how much was taken out, whether a personal guarantee was signed, 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 available options and speak to the SBA about any possible deferments or relief.
I wish I had an easier route to offer you, but I do hope that the info is somewhat helpful to you. Best wishes.
I understand that the EIDL *loan*, which I received last year, is not forgivable. Is it possible and legal to try and qualify for a PPP loan now, and use that money to pay off the EIDL? My loan was small but my business has not recovered through COVID yet, and even with the year deferment I don’t want my interest to keep rising because I can’t afford to pay this loan off yet. I severely underestimated the impact that COVID would have on my industry.
Hi BG,
Unfortunately as of May 5, 2021, the SBA has stopped accepting PPP applications due to lack of funds. You may however be able to tap into a small business grant or two. We have posts on a variety of small business grants, Nonprofit grants, Startup grants and how to find them, as well as tips on how to get your grant application noticed. Additionally, you may be eligible to increase your EIDL loan amount, if that is something you’d be interested in. I hope that at least one of these resources is helpful to you–and if you have any additional question please reach back out to us. Best wishes to you!
I received EIDL loan in 2020 but unfortunately I had to close my business anyway. Is there an exception to repayment if my business is now closed? Can I get any forgiveness for the loan? Or worse, am I going to be required to pay it back in full if I contact SBA with this question?
Hi Yvonna!
I’m sorry to hear about the closure of your business. Unfortunately, even if your business closes, you will be required to repay your EIDL. Unfortunately, if you do not pay, there are actions that the federal government will take. If you signed a personal guarantee to receive your loan, your personal assets may be seized to secure the debt. If you put collateral up for the loan, that collateral can also be seized if you default on the loan.
Even if you didn’t sign a personal guarantee or pledge collateral, there are still actions the government may take, including seizing business assets or business income tax refunds. The default may also be reported on your credit, significantly lowering your score and affecting your chances of borrowing in the future. There’s a good article here that explains what happens if you default on your EIDL.
You may also opt to file bankruptcy and can potentially have this loan discharged. But there are costs and drawbacks associated with bankruptcy, so it’s best to consult an attorney for more information on whether this is an option that would work for you.
The good news is that EIDL payments have been deferred until 2022. While you will still have to pay back the loan, this does buy you some extra time to explore your options for repayment. Good luck!