How To Determine If Your EIDL Loan Is Forgivable
COVID stimulus programs are winding down. One of the last to end will be the Economic Injury Disaster Loan (EIDL) program, which wraps up on December 31, 2021.
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Expert Analyst & Reviewer
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COVID stimulus programs are winding down. One of the last to end will be the Economic Injury Disaster Loan (EIDL) program, which wraps up on December 31, 2021.
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, and the EIDL loan is no different.
Grants, however, are another story. Below we’ll go through which COVID stimulus programs need to be repaid and which ones do not.
Table of Contents
Are The EIDL Loans & Grants Forgivable?
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. Grants do not need to be forgiven or repaid. Here’s a quick breakdown of which stimulus programs are forgivable.
| COVID-19 Relief Fund Type | Program Status | Forgivable? |
|---|---|---|
| PPP | Closed as of May 31, 2021 | Yes — restrictions apply |
| EIDL Loan | Open until December 31, 2021 | No |
| Targeted EIDL Advance | Open until December 31, 2021 | Yes — automatically |
| Supplemental Targeted Advance | Open until December 31, 2021 | Yes — automatically |
| SVOG | Closed as of August 20, 2021 | Yes — automatically |
| RRF | Closed as of May 24, 2021 | Yes — automatically |
Usually, when people think of a COVID stimulus program with a forgiveness process, they’re thinking of the Paycheck Protection Program (PPP). The PPP program is designed for staff retention; therefore, businesses need to meet a number of prerequisites before their loan is forgiven.
EIDL Loan Forgiveness
EIDL loans cannot be forgiven.
EIDL loans do have a deferment period, however. Loans made during the 2020 calendar year have a 24-month deferment window from the date of the note. For EIDL loans made during 2021, the deferment window is 18 months from the date of the note. You do not need to make payments during that period.
Targeted EIDL Advance Forgiveness Rules
If you successfully qualified for a Targeted EIDL Advance and receive the funds, there is no need to apply for forgiveness. As a grant, the Targeted EIDL Advance does not need to be repaid. Additionally, your Targeted EIDL Advance is not considered taxable income.
However, you must spend your grant on approved expenditures or risk violating the terms of the grant, in which case you could be asked to repay. Grant money may be spent on:
- Working capital and operating expenses that could have been met had the disaster not occurred
- Health care benefits
- Rent
- Utilities
- Fixed-debt payments
Supplemental Targeted Advance Forgiveness Rules
The Supplemental Targeted Advance grants especially hard-hit businesses in low-income areas an additional $5,000 in grant money. Like the regular Targeted Advance, it’s a grant and does not need to be repaid as long as you spend the money on qualified expenses. These are the same as for the Targeted EIDL Advance.
You do not need to apply for forgiveness.
Shuttered Venue Operators Grant Forgiveness Rules
The Shuttered Venue Operators Grant (SVOG) is a grant introduced in 2021 to aid live venues, movie theaters, museums, and talent agents who suffered economic losses due to the pandemic and lockdowns.
As grants, SVOGs do not have to be repaid, nor do they have a forgiveness process. You will, however, need to abide by the terms of the grant to avoid being asked to pay it back. SVOG funds can be spent on:
- Payroll
- Rent
- Utilities
- PPE, barriers, and other COVID-related protections
- Debt payments on debts incurred prior to February 15, 2020
- Payments to independent contractors up to $100K per contractor
- Maintenance
- State and local taxes and fees
- Administrative costs
- Operating leases in effect as of February 15, 2020
- Necessary insurance payments
- Capital expenditures for shows so long as this isn’t the primary use of funds
Restaurant Revitalization Fund Forgiveness Rules
The Restaurant Revitalization Fund (RRF) is a grant introduced in 2021 to aid restaurants negatively affected by COVID-19 and the resulting restrictions imposed to try to control its spread.
As a grant, the RRF does not need to be repaid, nor do recipients have to apply for forgiveness. As with the other grants we’ve covered, you will want to make sure you spend your funds on approved expenses to avoid being asked to pay back your grant. Approved expenses include:
- Payroll
- Business mortgage obligations
- Business rent obligations (but not for the prepayment of rent)
- Business debt service (but not for the prepayment of principal or interest)
- Utility payments
- Maintenance expenses
- Construction of outdoor seating
- Supplies, including protective equipment and cleaning materials
- Food and beverage expenses, including raw materials
- Supplier costs
- Operating expenses
How To Apply For EIDL Forgiveness
There is no need to apply for EIDL forgiveness. Remember, EIDL loans cannot for forgiven. EIDL grants are automatically forgiven, provided you use the funds on approved expenses.
EIDL Loan Repayment Terms
Because you do have to repay EIDL loans, you may be wondering what repayment terms you might receive. With regard to EIDL loans, 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.
One of the main advantages of EIDL loans is their long deferment period, during which you don’t have to make any payments. As we touched on earlier, loans made during the 2020 calendar year have a 24-month deferment window from the date of the note. Borrowers who got their loans in 2021 will have an 18-month deferment.
EIDL Forgiveness FAQs
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.
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If my business received an EIDL loan, and I (80% ownership) needed to file bankruptcy, but the co owner (20%) doesn’t file, would the loan debt go fully to him? I would imagine he would need to file bankruptcy if he couldn’t afford it, correct?
This comment refers to an earlier version of this post and may be outdated.
Hi Samantha!
With most loans, including SBA loans, each personal guarantor has agreed to take on the entire loan balance, regardless of the actions of other owners. You can check out this article to learn more. In other words, the co-owner may likely still be liable for the full balance of the loan if you opt to file for bankruptcy. The co-owner may also choose to file for bankruptcy if he is unable to afford this and other debts. Since I am not qualified to give legal advice, I would highly recommend that you and your partner speak with an attorney for targeted advice for this specific situation. Good luck!
This comment refers to an earlier version of this post and may be outdated.
Hello where do you apply for a EIDL loan forgiveness or for the grant is there a link?
Thank you
This comment refers to an earlier version of this post and may be outdated.
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!
This comment refers to an earlier version of this post and may be outdated.
I have a ppp loan and edil loan, I sold my business without notification to SBA. Can I still make a monthly payment?
This comment refers to an earlier version of this post and may be outdated.
Hi there!
If your business has received an EIDL or PPP loan, you must notify and receive approval from the SBA if you intend to sell the business. This information will all be in the loan documents that you signed. Unfortunately, I’m not qualified to give legal advice regarding your situation. However, I would recommend that you reach out directly to the SBA or seek legal counsel to find out next steps. Good luck!
This comment refers to an earlier version of this post and may be outdated.
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?)
This comment refers to an earlier version of this post and may be outdated.
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!
This comment refers to an earlier version of this post and may be outdated.
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?
This comment refers to an earlier version of this post and may be outdated.
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!
This comment refers to an earlier version of this post and may be outdated.
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?
This comment refers to an earlier version of this post and may be outdated.
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!
This comment refers to an earlier version of this post and may be outdated.
Good article.
This comment refers to an earlier version of this post and may be outdated.
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?
This comment refers to an earlier version of this post and may be outdated.
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.
This comment refers to an earlier version of this post and may be outdated.
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.
This comment refers to an earlier version of this post and may be outdated.
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!
This comment refers to an earlier version of this post and may be outdated.
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?
This comment refers to an earlier version of this post and may be outdated.
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!
This comment refers to an earlier version of this post and may be outdated.