Overview of the SBA Economic Injury Disaster Loan (EIDL) Program

March 31, 2020 - William R. Johnson
On March 6, Congress signed into law the Coronavirus Preparedness and Response Supplemental Appropriations Act. The act declared the coronavirus (COVID-19) outbreak a disaster under the Small Business Act, therefore opening the door for the SBA to use its lending authority to make economic injury disaster loans (EIDLs) for small businesses impacted by the pandemic. On March 19, the SBA certified the entire state of South Carolina as an eligible area.

On March 27, President Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act, an historic $2 trillion stimulus package to provide financial assistance to individuals and businesses. The CARES Act allows entities that have applied for EIDLs to receive a short-term advance of up to $10,000 while their EIDL applications are pending.

The CARES Act also created the Paycheck Protection Program (PPP). Please review this alert for additional information on the PPP.

Below is an overview of the EIDL Program: 

  • Most small businesses are eligible to apply.
  • Credit history and ability to repay will be considered.
  • Must show economic injury due to coronavirus (COVID-19), not other factors.
  • The entire state of South Carolina is an eligible physical area.
  • These loans do not go through a lender; they come directly from SBA Disaster Assistance ( http://disasterloanassistance.sba.gov).
  • There is no cost to apply.
  • Eligible entities can borrow up to $2 million at interest rates of 3.75% for small businesses and 2.75% nonprofits; the rates are fixed for the full term of the loan.
  • Terms are up to 30 years, no prepayment penalty.
  • May be used for working capital (i.e., to pay fixed debts, payroll, accounts payable), not lost sales or profits or for expansion.
  • Loans over $25,000 generally require collateral (real estate if available, but SBA will not decline a loan for lack of collateral).
  • Examples of eligible industries include but are not limited to hotels, recreational facilities, charter boats, manufacturers, sports vendors, owners of rental property, restaurants, retailers, souvenir shops, travel agencies, wholesalers and private nonprofits under 501(c), (d), or (e).
  • Basic filing requirements: 
    1. completed SBA loan application (SBA Form 5 or 5C),
    2. tax information authorization (IRS Form 4506T) for the applicant, principals (20% or more ownership), and affiliates,
    3. copy of most recent federal income tax return,
    4. schedule of liabilities (SBA Form 2202), and
    5. personal financial statement (SBA Form 431) for owners.
  • Other information may be required (i.e., 2019 P&L if 2019 income tax return not yet filed, also SBA Form 1368 providing monthly sales figures).
  • Ineligible businesses – agricultural (need to look to USDA Rural Development), churches, public charities, gambling establishments.
  • Apply only at http://disasterloanassistance.sba.gov. SBA recommends clearing web history/cache prior to filing.
  • Timeline for approval: 18-21 days to get approval, then another 5 days to get funding, so approximately one month to get funds.
  • For urgent needs, SBA Express Lenders (local bank) may be able to access funds more quickly.  A prior relationship is required, and the bank must have been an SBA Express Lender prior to the Coronavirus situation. This kind of loan is the only type of loan that EIDL loans can be used to pay off.
  • Find out if a particular business is small here.
  • Click here to view the full text of the SBA Presentation.
  • Click here to view the applicable Standard Operating Procedure governing the administration of the program.  

Please visit the HSB COVID-19 Resources site for additional information.