How SBA Economic Injury Disaster Loan (EIDL) Emergency Advances Work & Where Your Small Business Can Get One

US small businesses have been a major casualty of the COVID-19 crisis. The U.S. Chamber of Commerce reports that a total of 54% of the nation’s small businesses are closed or will close soon as a result of the pandemic. To help mitigate the heavy economic damage, Congress passed the unprecedented $2 trillion CARES Act, which includes $350 billion in coronavirus stimulus relief for small businesses. It can be a little tricky, though, sussing out all the different Small Business Administration (SBA) loans and programs for small businesses included in this package.

One of the small business funding programs funded under the CARES umbrella, Economic Injury Disaster Loans (EIDL) include a forgivable cash advance—essentially a grant—of up to $10,000 from the SBA. Read on to learn more about EIDL loan advances and how to get one.

What The SBA EIDL Loan Advance Program Is & How It Can Help Small Businesses

What Your Small Business Could Get From The Program

As mentioned, the EIDL loan itself can be up to $2 million—depending on how much the SBA approves you for—and the advance portion was initially announced as a $10,000 grant. However, there has been some confusion as to how large of an EIDL grant businesses will actually receive.

$1,000-Per-Employee Cap

Days after the EIDL was announced, a funding cap on the advance was implemented due to the overwhelming popularity of the program and the limited amount of funding available. The SBA clarified that the rules had been changed, so that businesses could only receive an EIDL advance of $1,000 for each employee—with a cap of $10,000. This means if you have four employees, you would receive an EIDL grant of $4,000. If you are self-employed, the advance would be $1,000.

Some businesses who applied with the understanding that they would receive the full $10K were understandably upset when they learned of the new rule or received a smaller-than-expected EIDL grant. Some other businesses reported that despite having fewer than 10 employees, they received the full $10,000 anyway.

New SBA EIDL Advance Recommendations

On April 25, following the passage of a second round of funding for the PPP and EIDL programs, which includes an additional $10 billion for EIDL grants, democratic leaders wrote a letter to the U.S. Treasury and the SBA recommending that all applicants should receive the full $10,000, regardless of size. It is unclear, though, whether the SBA will follow these recommendations.

When Will I Get The EIDL Advance?

How soon will the advance arrive? According to the SBA, Economic Injury Disaster Loan advance funds will be made available “within three days of a successful application.” But on Reddit and social media, business owners have reported that it took longer—or that they have not heard back on the status of their advance after a week of applying; this is likely because the SBA has been inundated with applications. Nevertheless, we have to assume that the funds will eventually come through and that the sooner you apply, the better.

Note that the SBA closed applications for the EIDL program after funds from the CARES Act were exhausted. Though more funds for the program were allocated by the second coronavirus business stimulus package (the Paycheck Protection Program and Health Care Enhancement Act), applications had not yet reopened at the time of writing. The SBA did state that that applications that had already been turned in were being processed on a “first-come, first-serve” basis. We can safely assume that the backlog of applications means it could take even longer than expected to receive your advance.

Note: If you’re calling the SBA’s 1-800-659-2955 number to check on the status of your EIDL application, make sure to ask for the Tier 2 option, as this pertains specifically to the COVID-19 program. If checking your EIDL status online, you need to find the SBA Assistant at https://disasterloanassistance.sba.gov/s

Do I Have To Repay The EIDL Advance?

Again, you will have to repay the main portion of the EIDL loan proceeds, but not the EIDL advance. However, if you also receive a forgivable PPP loan, you may be able to refinance a portion of your EIDL into your PPP, and have the EIDL forgiven that way. If you do this, the $10,000 grant will be subtracted from the PPP forgiveness amount.

As far as repayment terms on EIDL loans, term length can be up to 30 years; The interest rate is 3.75%, and you can defer your loan payments for a year before you start paying on the loan. This is a high-quality loan, and if you need it you shouldn’t hesitate to apply because funding for this program may soon be exhausted. You must apply no later than December 16, 2020, in most states.

What You Need To Qualify For An EIDL Loan Grant

Because the entire country has been declared a disaster area, most small businesses are eligible to receive an EIDL loan. Even sole proprietorships, nonprofit organizations, self-employed individuals, and gig economy workers are eligible. If you are eligible for the loan, then you are eligible for the advance/grant, even if your loan application is not ultimately approved.

Here are some more specifics about the criteria your business needs to qualify for an EIDL loan and the forgivable grant:

• Business must have fewer than 500 employees (businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries)
• Businesses cannot be engaged in illegal activities as defined by federal guidelines (e.g., marijuana dispensaries) or lobbying
• Business owners cannot be more than 60 days behind on child support
• Your business cannot be a strip club, casino, or agricultural enterprise (farm)
• Business owners cannot be currently incarcerated; on parole or probation; subject to any current criminal charges or proceedings; pled guilty to a felony or been placed on parole or probation for a felony within the past five years

EIDL loans of $25,000 or less do not require collateral, and no personal guarantee is required on loans less than $200,000.

What You Can Use EIDL Proceeds For

EIDL loan proceeds and advances can be used payroll, paid leave, leases or mortgages, or other operational costs. You may not use the EIDL to refinance existing debt (there is another SBA program for COVID-19 debt relief). Also, if you apply for the PPP loan as well as an EIDL, you have to use the loan proceeds for different purposes. For most businesses, that would mean using the PPP to cover payroll (since at least 75% of your PPP proceeds must be used on payroll), and using the EIDL to cover non-payroll expenses.

How To Apply For The Economic Injury Disaster Loan Grant Program

Once the SBA starts accepting new EIDL applications again, you should be able to find the COVID-19 Economic Injury Disaster Loan Application on the SBA’s website at covid19relief.sba.gov; you may also be able to apply through your preferred SBA lender. The application is fairly straightforward, and most business owners shouldn’t have a hard time completing it. It is basically a streamlined version of the normal EIDL application and should take no more than two hours to complete.

You will, however, have to provide some basic information about yourself and your business (SSN, address, etc.), as is typical for applying for any business loan, and you’ll have to let the SBA check your credit history and tax records.

Frequently Asked Questions

My EIDL was approved, but the offer is for less than I expected. What can I do?

The SBA uses this formula to calculate how large of an EIDL loan standard small businesses are eligible for:

Revenue minus COGS, divided by 2, minus the advance (capped at $150K).

It is possible that you inputted the wrong amount for your revenue or COGS. Assuming you have not yet accepted the loan offer in the portal, you can still request to revise these numbers if you think they are incorrect and are not happy with the amount—start this process by calling Tier 2 support. Make sure you have documentation to back up your numbers, including tax returns and P&L statements.

If you already accepted a loan offer, it’s unfortunately too late to revise your application, as currently no loan modifications are allowed.

I heard EIDL loans are now capped at $150K. Is this true?

In early May, the Washington Post and other news outlets confirmed that EIDL loans are now capped at $150K. This is of course significantly lower than the original $2 million cap. The SBA did not formally announce or comment on the change. The cap will not affect you if your loan was already being obligated prior to the change.

Can I accept the EIDL advance but reject the loan?

Yes, this may be possible, as other applicants have reported doing this. Just make sure you have already received the advance before you reject the loan offer. Note that while you can ultimately reject the EIDL loan offer, it is not possible to apply for only the advance; you need to apply for both.

Is it too late to apply for an EIDL?

Unfortunately, the answer for most small businesses is yes. As mentioned, EIDL applications are currently only open for agricultural businesses (with 500 or fewer employees), who were left out of the first round of funding. We’ll keep our readers updated if anything changes.

Other Resources For Coronavirus-Affected Businesses

I hope this post has been helpful. If your business has struggled under COVID-19 and you think you qualify for the EIDL, I recommend applying for the loan ASAP, since available funds are surely going quickly.

Here are some additional resources might be able to help your small business during these trying times:

• Small Business Loan Resources & Guides For Businesses Affected By The Coronavirus
• SBA Paycheck Protection Program (PPP) Loans Explained: How They Work, Who Qualifies, & Where To Apply
• Your COVID-Affected Small Business Might Be Eligible For SBA Loan Debt Relief Via The CARES Act
• Applications For Contractor & Freelancer PPP Loans Begin Today: Here’s What The Self-Employed Should Know
• How The CARES Act Coronavirus Stimulus Package Could Help Your Small Business & Employees
• How To Keep Your Employees On Staff And Busy During The Coronavirus

Finally, we have a COVID-19 small business hub with even more resources, including topics specific to certain sectors such as retail, restaurants, salons, and others. If you find our content useful, please share it with other members of your small business community. We can get through this crisis together by sharing accurate information within the small business community and taking swift, smart action to keep our businesses afloat during this critical time.