What are Economic Injury Disaster Loans (EIDL)
In response to the COVID-19 pandemic, small business owners including agricultural businesses can apply for an EIDL through the Small Business Administration. The program is designed to provide economic relief due to a temporary loss of revenue due to the pandemic. Small business owners can use the loan proceeds for working capital and normal operating expenses. This program is set to expire on December 21, 2020.
The online application is at this address: https://covid19relief.sba.gov/#/
The SBA has a very helpful Frequently Asked Questions: COVID-19 EIDL factsheet that potential borrowers are encouraged to read.
To be eligible for an EIDL, a business must have 500 or fewer employees and have been in operation by January 31, 2020. The following types of businesses are eligible for EIDL:
- Sole proprietorships, with or without employees,
- Independent contractors, with or without employees,
- Employee-owned businesses,
- Faith-based organizations,
- Tribal small businesses,
- Private non-profit that has tax exemptions under 501 (c), (d) or (e).
The SBA EIDL COVID-19 loans can be for up to six months of working capital, based on the severity of economic injury suffered. The interest rate is 3.75% for businesses and 2.75% for non-profits. Maximum term is 30 years. The SBA considers credit history of the applicant and determines the loan term and monthly payments based on the applicant’s financial position. Collateral is required for loans over $25,000.
The emergency loans are not forgiven (except for emergency advances, which are no longer available)
Loans can be used to cover:
- Fixed debts (like mortgages but not on federal debts),
- Accounts payable,
- Other operating expenses.
There are several things though for which these loans cannot be used. Iowa State University’s Center for Agricultural Law and Taxation has more information in a blog post from April 24, 2020, including a list of what is prohibited, such as direct payments to owners, refinancing long-term debt, expanding facilities or repairing physical damages.
If an application has already received other disaster assistance that must be declared in the application.
Links for more information
From the U.S. Small Business Administration:
- General Information about the Economic Injury Disaster Loan and Advance Program
- Frequently Asked Questions – COVID-19 EIDL
From the Wisconsin Small Business Development Center:
- SBA EIDL Application Walk Through (YouTube video)
Iowa State University Center for Agricultural Law and Taxation COVID-19 Resources: https://www.calt.iastate.edu/covid-19-resources
Small Business Administration EIDL webpage: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loans