Can My Economic Injury Disaster Loan (EIDL) & Emergency Advance For Coronavirus Relief Be Forgiven?
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On July 11, the SBA announced the end of the EIDL advance program. The SBA will still process EIDL applications, but the advance portion of the loan is no longer available to new applicants.
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.
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Can EIDL Loans & Advances Be Forgiven?
There are two parts to the EIDL program: the loan itself and an advance on the loan. The main portion of the loan — which can be as high as $2 million — is generally not forgivable. You’ll need to repay the main portion of your EIDL proceeds. The advance, on the other hand, is a different story.
The advance — which sends $1,000 your way for every employee in your business and caps its limit at $10,000 — effectively acts as a grant. As such, you do not need to repay the advance. That means you’ll be able to put the money right into your business without needing to pay it off in the future.
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.
How To Get Forgiveness On Your EIDL Emergency Advance
To receive forgiveness on the advance portion of your EIDL, you’ll need to spend the money you receive on earmarked categories — you can’t just spend it on anything. Per New York state, the eligible categories to trigger the advance’s forgiveness are:
- Paid leave to employees
- Maintaining payroll
- Paying for increased costs to purchase materials
- Mortgage payments
- Lease payments
- Making repayments on obligations unable to be met due to revenue losses
It’s also worth noting that the advance can still be forgiven even if your EIDL application is ultimately rejected. Additionally, if you take advantage of the SBA’s Paycheck Protection Program, your EIDL advance will be deducted from your PPP Loan forgiveness.
Having earmarked requirements for how the advance can be spent might be frustrating. However, the categories should still provide enough leeway to help keep your business afloat in these unprecedented times.
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.
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. You can also learn how to set up a gift card program for your business or how to best utilize your business credit card.
Jared Beilby
Jared is a writer hailing from the Pacific Northwest. Besides writing for Merchant Maverick, he has experience writing about sports and video games. He holds a Bachelor of Arts in Journalism from George Fox University.
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I already applied for my PPP forgiveness and did not mention the EIDL in my PPP forgiveness application. Is there any way to get forgiveness for EIDL with PPP?
Hi Ani,
The EIDL loan itself is not forgivable unless you roll it into a PPP loan, a portion of which may be forgivable.
So, I received my EIDL advance of $4000 on 4/29 AFTER my PPP loan. My qualified expenses exceed both. Can I get both forgiven?
Hi Becky,
You can use the PPP to refinance the EIDL. Any EIDL money spent on payroll can be forgiven under the PPP (as long as everything is properly documented).
We received support in three categories…
PPP…..$20,566.00
EIDL….$52,500.00
EIDG….$ 8000.00
Under the new rules for forgiveness announced on Oct. 8, 2020….this is “supposed” to forgive loans under 50K with a simple form/statement that allows for less paperwork and documentation for loans up to 50K.
Under Senate Bill 4321, the “Continuing Small Business Recovery and Paycheck Protection Program Act, all PPP borrowers receiving $150,000 or less shall automatically have their loan forgiven if the debtee “signs and submits to the lender an attestation that the eligible recipient made a good faith effort to comply with the requirements under section 7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)).”
What is the status of 4231?
Right now, small business is being told to “wait and see” what new relief is going to be announced for easy forgiveness….what do you suggest for our situation?
Hi Michael,
Forgiveness doesn’t need to be applied for until the maturity date of the loan (which is two to five years down the line) and you have 10 months until after the end of the loan’s service date to apply for forgiveness to avoid losing deferment options (per the SBA’s FAQs), so there’s currently no rush to apply for forgiveness. In the meantime, you can keep an eye on the congress bill tracker for updates.
Hello,
I applied for the PPP but received the EIDL and just now finding out that the EIDL is different from the PPP and is not a loan that is forgiven with the new forgiveness program the government just instituted. What relief exists for EIDL recipients to get our loans forgiven? ANy help would be appreciated.
Thank you
Max
Hi Max,
That sounds like a very confusing and frustrating situation. If you happened to receive the EIDL Advance/Grant, that portion does not need to be repaid. But the loan portion does, and as far as we know there aren’t any forgiveness options currently available for the EIDL.
Best of luck to you.
I know that the repayment is deferred for a year after closing. Do you already incur interest charges prior to the repayment? What if you are able to repay sooner? Would that help as to not pay for finance charges. It’s for a loan of $8000
Hi Marlon,
I believe that interest begins accruing immediately (based on what others have reported here), but there is no prepayment penalty. This post explains the rates and fees in more detail. I hope it helps! Best wishes.
How can I find out how much of my EIDL loan is “Emergency Advance” and how much is the “Main Part”? Since the Advance amount is forgivable I really need to know. I logged onto my account with SBA but it does not say.
Hi N,
The advance would have been deposited separate from the loan, and it would have come without any “fanfare”. So check your bank deposits and see if you received more than one deposit. It would be the smaller of the two.
Hello Jessica,
So my father received $1000 immediately, but then received 9,000 a month or so later. So, he will only have the $1000 dollars forgiven then? I am trying to contact someone there. Thank you…
Kim Simmons
Hi Kimberly,
That sounds correct. The $1k was likely the advance on a $10k loan, leaving the balance owed at $9k. However, if he also receives a forgivable PPP loan, he may be able to refinance a portion of his EIDL into his PPP, and have the EIDL forgiven that way. If he does this, the $1k advance will be subtracted from the PPP forgiveness amount. I hope that helps!