What is the Economic Injury Disaster Loan and how can it help small businesses?

December 29, 2020 : H&R Block

Editor’s Note: The article below was originally published on September 3, 2020. It includes updates from the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act of 2021 approved on Dec. 27, 2020.  This bill provides additional funding for the Economic Injury Disaster Loan (EIDL) Advance program as noted.

In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, a sweeping new law created to help individuals and small businesses who are suffering financially by the coronavirus pandemic. A significant part of the act is the Economic Injury Disaster Loan, or EIDL.

While this small business loan has been around for some time, the Small Business Administration (SBA) expanded eligibility for businesses impacted by COVID-19.

Read on and we’ll walk you through what funding is currently available, its application process, and requirements so you can figure out if it’s a good fit for you and your small business. As millions of businesses have quickly pivoted into the “red” post-virus outbreak, loans such as this one could be a saving grace.

What is the Economic Injury Disaster Loan (EIDL)?

economic injury disaster loanThe Economic Injury Disaster Loan is a small business loan from the SBA. Historically, it has been used for disaster areas from non-farm, private-sector disaster losses. in 2020, it has been promoted as a key government small business loan to use for the economic effects of the coronavirus outbreak as part of the CARES Act.

The EIDL program ended on Dec. 21, 2020, so no new loans are available at this time. Already filed applications that have not been funded can still be funded. However, the CRRSA Act authorized an additional $20 billion for EIDL Advance grants.

What is the Economic Injury Disaster Advance grant? How is it different?

There was the EIDL loan itself, and also, an advance of up to $10,000.

The new program funding approved on Dec. 27 is designed to ensure struggling small businesses receive relief quickly. It targets the $10,000 advance to small businesses in low-income community—even if they received a previous EIDL Advance—and shuttered venue operators.

The bill also extends the covered period for emergency EIDL grants through Dec. 31, 2021.

Who qualifies for an Economic Injury Disaster Loan? What are the requirements?

Before December 21, 2020, any business, cooperative, or Employee Stock Ownership Plan with 500 or fewer employees and all sole proprietors, independent contractors, and private non-profits could apply to obtain this Small Business Administration loan.

(Some businesses with 500 or more employees may qualify. Refer to the SBA Table of Size Standards to see if your industry qualifies with a higher amount of employees.)

You can use the EIDL for:

  • Paid sick leave for employees
  • Maintaining payroll
  • Covering the increased cost of materials due to supply chain limitations
  • Rent or mortgage payments
  • Repaying unmet obligations due to revenue loss
  • All otherwise deductible expenses.

Economic Injury Disaster Loan eligibility

To be eligible for EIDL assistance, the organizations must meet the definition and size standards of a small business and have:

  • Sustained economic injury
  • Located in a disaster-declared area

Here are some benefits of this Economic Injury Disaster Loan

The EIDL program offered before Dec. 21, 2020 had many benefits for small business owners.

Here are some specific details related to the Economic Injury Disaster Loan:

  • Borrowers don’t have to give a personal guarantee for loans under $200,000
  • Borrowers can request an advance of up to $10,000 to get paid out in three days*
  • Businesses can borrow up to $2 million
  • The advance amount is determined by number of employees at $1,000 each*
  • The SBA does not charge upfront loan fees or payment penalties for the advance*

*The EIDL advance has been extended to Dec. 31, 2021.

How to apply for the EIDL Advance

Looking for the Economic Injury Disaster Loan application details? Qualifying U.S. businesses can apply online at the SBA’s Disaster Loan Assistance website. For personalized loan application assistance, you can:

  • Call 1-800-659-2955
  • Email DisasterCustomerService@sba.gov

Can an SBA disaster loan be forgiven?

If small business owners take out a loan, they often wonder if it’s forgiven. The Economic Injury Disaster Loan forgiveness only applies to the “advance” portion of the loan. Applicants who were able to receive the advance before it was suspended and after it was extended will not be required to repay the advance provided, even if they’re subsequently denied a loan.

Tax filing note: Even if your loan is forgiven, you will be able to deduct otherwise deductible expenses paid with this loan.

When do you receive the EIDL Advance?

Business owners who applied for the extended EIDL advance should have received it within 21 days if their application was successful. This is a change from the earlier approval and disbursement time frame of three days.

More help with small business taxes

We know there’s a lot of uncertainty for you and your business during this time. Your business tax and accounting needs don’t have to be one of them. For hands-on guidance with small business tax needs, get help.

Rely on our team of small business certified tax pros to get your taxes right and keep your business on track. Connect with us at blockadvisors.com.

Our small business tax professional certification is awarded by Block Advisors, a part of H&R Block, based upon successful completion of proprietary training. Our Block Advisors small business services are available at participating Block Advisors and H&R Block offices nationwide.

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