What Is An Economic Injury Disaster Loan? How Federal EIDL Loans from the SBA Work

If your business is in a disaster area, you may be able to get a $2 million Small Business Administration loan.
Dec 17, 2021

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An Economic Injury Disaster Loan, or EIDL, is a 30-year loan of up to $2 million from the Small Business Administration for small businesses that are in disaster areas and can’t pay their ordinary and necessary operating expenses. The interest rate can't exceed 4%.

How EIDL loans work

EIDL loans provide the working capital a small business may need if a disaster has occurred that prevents it from operating normally. A separate SBA program issues business physical disaster loans that cover property damage.

Fast facts about SBA EIDL loans

Max

$2,000,000.

Term

30 years.

Interest rate

4% max.

Collateral

Required if loan is over $25,000. Loans of $200,000 or less don't require owners to use a primary residence as collateral if they have other assets worth at least the amount of the loan.

Prepayment penalties and fees

None.

Deadline to apply

Within nine months of disaster declaration; exceptions are available for things such as illness, death, mail disruptions, military service or relocation and repair issues.

Other important things to know about getting an EIDL loan

  • To qualify, your business has to be in a declared disaster area. You can see the SBA’s list of declared disasters.

  • The SBA determines how much it will lend you and how long you have to repay the loan.

  • The SBA makes an EIDL loan only if it determines that you can’t get credit elsewhere.

  • You can get an EIDL loan as well as a physical disaster loan from the SBA if you qualify for both. The maximum combined loan amount is $2 million.

  • Insurance claims don’t have to be final for the SBA to approve an EIDL loan.

SBA COVID EIDL loan and grant programs

As part of the federal government’s ongoing response to the pandemic, the SBA offered a special COVID EIDL loan program and EIDL grant program. These programs expired Dec. 31, 2021.

The terms and rates on COVID EIDL loans were in many ways the same as those in the SBA’s regular EIDL program described above, but the loan payments are deferred for the first two years.

Under the EIDL grant program, businesses that applied for COVID EIDL loans were possibly eligible for up to $15,000 of free money, also called an EIDL advance, from the SBA. The SBA invited COVID EIDL loan applicants to apply for an advance if their businesses were in low-income areas.

How to get an EIDL loan

There are seven steps to getting an SBA EIDL loan:

  1. Apply. Fill out the application on the SBA website. You can also get an application in person at a local recovery center or by calling 1-800-659-2955 to have the SBA mail an application to you. Generally, owners will need to provide personal financial statements, business income statements, balance sheets and detailed information about the business’s fixed debts.

  2. Sign IRS Form 4506-T. This is part of your application, and it gives the IRS permission to give copies of your tax returns to the SBA.

  3. Meet with the inspector. The SBA will send an inspector to estimate the cost of damage to your business once it has your application.

  4. Wait for a decision. The SBA says its goal is to make a decision on an application within two to three weeks. The loan decisions are communicated in writing.

  5. Sign the paperwork. If your loan is approved, the SBA prepares and sends you the loan closing documents to sign.

  6. Receive the money. After it receives your signed closing documents, the SBA makes an initial disbursement of $25,000 within five days.

  7. Stay in touch with the SBA. The SBA assigns a case manager who schedules the rest of the disbursements and adjusts the loan after closing if your circumstances change.