A Complete Guide on Economic Injury Disaster Loans

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This year many businesses have seen losses and breakdowns due to COVID-19 pandemic. The degradation of financial statuses of the businesses and the organizations has made people worry about their future in the market. If you are also one of those, there is no need to feel negative about the situations, as the EIDL is started to help you especially in these conditions. 

In this guide, we are going to make it quite easy to understand the basic terms that are necessary for you to know if you are planning to get into the loan seeking process. Also, we will make your going through this whole process easy for you by providing all the essential details about the program that you might need in the loan application process. 

What is an economic injury disaster loan? 

The loan program designed to help small businesses and non-profit organizations that have been struck with the declared disaster of any type is known as Economic Injury Disaster Loan EIDL. It is helpful for any businesses that are currently facing a severe financial setback including the temporary loss of revenue due to the disaster. 

Economic Injury Disaster loans are a great form of Federal assistance which is provided to business persons to help them repair their damaged properties. This is a useful form of loan that is in service for all the private sector’s business owners. Also, it is not only limited to small business owners, rather, any owner of a corporation or organization whether small or large can easily apply for the loan and can get the most benefit out of it.  

These can provide to you up to almost $2 million of financial assistance. However, the actual amount purely depends upon the strength of damage and amount of economic injury done to any private sector business and also to those organizations which suffer substantial economic loss as a result of any disaster that has been declared. 

Thus, these EIDLs can prove to be of many benefits to you in any type of disastrous conditions. 

Who Provides the EIDLs 

These EIDLs are provided by the Small Business Administration of the U.S state. SBA offers this affordable financial help to the businesses of all kinds present in private sectors, and also to all the non-profit organizations that are present in the declared disaster areas. 

Terms and Conditions To Get EIDLs 

There are certain terms and conditions that are put forward by the EIDLs provider which you must keep in mind before stepping ahead to involve into the process for applying and getting the loan. When you take care of these terms and conditions there are very less chances of you facing any trouble in your way. Here are some of them which we suppose you must know: 

Eligibility Criteria 

This is the most important thing that you must be aware of whenever you plan to apply for a loan. There are some times when you are passionate to apply to get these EID UL loans but the ineligibility hinders the process. So, to prevent yourself from wasting your precious time get to know the eligibility criteria for loan application. To qualify for the disaster loan from SBA you must:

  • Be a non-profit 501 (c)(3) organization or any small business that has only 500 or even fewer employees in working 
  • Be an independent contractor or sole proprietor 
  • Be able to present that your business or organization has been negatively impacted by the disaster and that your company is strictly in need of the loan.
  • Be able to show up that your company must be located in a disaster area
  • Have your personal or business credit card to develop a mutual trustworthiness with the loan providers. 
  • Be able to present any type of collateral to them; It can be a real estate that is originally owned by the business’ principles 

So, if you think you have all the above mentioned things with you then you are perfectly eligible to apply for the EIDL. 

Max Amount Provided

EIDLs easily provide to you up to almost $2 million of financial assistance. However, the actual amount purely depends upon the strength of damage and amount of economic injury done to any private sector business and also to those organizations which suffer substantial economic loss as a result of any disaster that has been declared. 

However, when SBA provides the loan to the loan seekers, it asks for no upfront fees or any types of early payment penalties to make the process of loan application much easier and simpler. Also, it takes great care of you in deciding the repayment term considering our financial ability to repay it. 

Interest Rate 

SBA takes great care in keeping the interest value low so that it does not become difficult for any private business owner or non-profit organization to pay-back the loan in the given time.  According to the SBA initiative the interest rate cannot exceed 4%. This is a great facility provided by the SBA that makes the lives and careers of disaster-stricken business people easy. 

Loan Time Period 

You will be quite amazed to know that all EIDLs provided by the SBA come with an extended time period of about 30 years. However, the repayment period starts right in your first year of initial receiving the loan

No Change Accepted in the Business structure 

Although you are free to receive any amount of up to $2 million by receiving the loan from the SBA you seek permission from it whenever you want to change your business structure. For example, if you plan to change your business structure from an S corporation to sole proprietorship until SBA approves of it

Strict Prohibitions on Physical  Improvements of Business  

Before making up your mind to apply for the EIDLs you must know this thing that there are very strict terms regarding your usage of the loans. So, do not think that you can use an EIDL amount by SBA on the physical improvement of your business. 

Moreover, SBA makes it compulsory for you to save all the receipts of the purchases that you have done with EIDL amount, so to be on a safer side and to avoid any type of trouble in the future make sure to save all the receipts with you

So, you cannot use you EIDL money on the following 

  • Relocation costs
  • Bonuses
  • Stockholder dividends
  • Loan repayment, including federal loans
  • Facility repairs or additions
  • Refinancing long-term debt

However, you can spend your EID UL money on:

To make you more concerned about the future, we once again remind you to make sure to save all the receipts of the purchases that you do with the loan monies. 

What are the Advantages and Disadvantages of the EIDLs?

Although there may be a lot of reasons that you want to opt for EIDL, still it is important to consider both the usefulness and the drawbacks of these loans. This will greatly help you to increase your understanding about the loan and will let you make your final decision; whether to go for the loan application or not, depending upon your understanding. 

 Advantages of the EIDLs 

Before discussing the drawbacks of the loans let us first elaborate on how useful this loan can be for you and your business. Following are 3 advantages of the EIDL loans that benefit you in the longer run

Easy Application Process 

When it comes to government programs, we all expect the process to be too complicated. This is why applying for an EIDL loan is so great. SBA pointed out that the application could be completed in about two hours, but if you are active enough it will just take your 45 minutes to an hour.

Once completed, simply submit your application and wait for a response with the loan quote. The loan quote shows the amount to which you are qualified to receive, but you can change the amount by signing the application electronically. 

For example, if you are qualified to receive the loan amount of up to $ 50,000, you can change the maximum loan request amount to $ 50,000.

After the application is completed, the credit officer will review your application and usually sends an approval or rejection letter within days of the application. After approval, the money will be deposited to your bank account using all the details that you have provided in the application. Funds are usually issued within 5-10 business days of approval.

 Flexible, long-term repayment options

EIDL has a repayment plan of 30-years. If you choose to pay in advance, you will not be fined. In addition, although SBA allows you to choose to start repayment immediately, the loan will be delayed immediately, so you have one year to pay off the loan.

3 Disadvantages of getting an EIDL loan

After considering the advantages of the EIDL loans here we are with the 3 advantages of the loans that you should not ignore before putting yourself in the loan application process. In addition to this, these disadvantages will help you to make up the decision with a clearer mind. 

Cannot be Forgiven 

Unlike PPP loans, it is not possible to be forgiven for the EIDL loans. The down payment was the only part that could be forgiven but that is also not available. 

Restrictive terms 

As mentioned earlier, you cannot use EIDL funds for a variety of purposes, including employee rewards, relocation expenses, or refunds.

Not for repairs 

You cannot use your EIDL funds for the relocation costs, bonuses, stockholder dividends, loan repayment, including federal loans facility repairs or additions, and refinancing long-term debt.

How to get EIDL from SBA? 

There is no hard and fast rule and strict regulations in the way of applying for any type of disaster loan.  However, the procedure of applying varies with the types of loans you are applying for. Following are some easy steps and procedure mentioned depending upon the types of loans: 

To apply for the Disaster Loans, you have to follow the below mentioned simple steps. 

  1. Visit the official SBA’s application page 
  2. Here you will be asked various questions about your business history. These questions may relate to; the length of the time your business has been in the market, The location of your business, the schedule of liabilities, the tax return related to your business, and also the financial statement of your business. 
  3. Fill out the application by answering all the mentioned questions and submit your application. 

Just by following these simple steps, you can easily apply for disaster loans that may help you in your business recovery and in the maintenance of your business’ financial status in the market. 

How to repay the EIDL to SBA? 

After getting the disaster loans, there comes a time when you have to repay it back, so you must know all the procedures of the repayment in order to avoid making any mistake. Following are the three main ways that you can choose from according to your own convenience

Through Phone 

You can easily pay back all the amounts simply call them on their number and get the procedure done. 

Online Repayment 

When considering the online procedure for the repayment of a loan, you can make a visit to their online site to make the recurrent payments or even one time whatever suits you the most. 

Through Mail 

The last method of repayment of the loan is through the mail. You can send a check of payment to the SBA along with the loan number that must be written on the check. Make sure to get the official mailing address of SBA before delivering your check to them. 

Our Suggestion 

These economic injury disaster loans are a great initiative by the U.S SBA to help your small businesses thrive once again. In the time of need, when your businesses or organizations are faced with some sudden calamity or any disaster these can be the best choice for you. However, we still suggest you not ignore any of the above-mentioned points if you really want to avoid putting yourself into trouble in the near future. 

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