Can My Economic Injury Disaster Loan (EIDL) & Emergency Advance For Coronavirus Relief Be Forgiven?

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.

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.