Economic Injury Disaster Loan (EIDL) Program FAQs

The recent CARES Act signed into law expanded the EIDL Program to provide relief related to COVID-19. DHG addresses the Economic Injury Disaster Loan (EIDL) Program below.

General

What is the Coronavirus Economic Injury Disaster Loan provision?

The provision provides for an expansion of the SBA 7(b)(2) loan program including an advance which may be requested by the borrow for up to $10,000 in emergency grant funding with no repayment necessary.

How do you apply for an EIDL loan?

Directly on the SBA website for COVID-19 relief. Business owners with eligible businesses may apply for an EIDL directly online at: https://covid19relief.sba.gov/#/ or contact their local SBA Office.

Can I get more than one EIDL loan?

Yes, a business could have an existing EIDL for another disaster declaration and could be eligible for an EIDL related to COVID-19, if the business suffered substantial economic damage as a result of COVID-19 for the period of January 31, 2020 to December 31, 2020.

Are personal guarantees or collateral required for an EIDL loan?

For the first $25,000 no collateral is required. The CARES Act does not expressly mention collateral requirement, but you may be required to pledge collateral for loans of more than $25,000. Personal guarantees are not required up to the first $200,000 during the covered period of January 31, 2020 and December 31, 2020.

Is it a first-come, first-serve basis and do I need to apply immediately for an EIDL loan?

The CARES Act appropriates $10 billion for the EIDL and there is currently no guidance on additional appropriations after this runs out.

What is the ‘covered period’?

January 31, 2020 through December 31, 2020.

What is the expected timeline to receive funds?

Borrowers can generally expect two-three weeks for approval depending on volume and the disbursement can take up to five days.

Can I participate in both the PPP and EIDL programs?

If an EIDL loan was obtained related to COVID-19 between January 31, 2020 and the date at which the Paycheck Protection Program becomes available, borrowers may be able to refinance the EIDL into the Paycheck Protection Program for loan forgiveness purposes. However, borrowers may not take out an EIDL and a Paycheck Protection Program for the same purposes. If a borrower took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under the Paycheck Protection Program.

Eligibility

Is my geographic area eligible for the EIDL due to the Coronavirus?

Small business owners in all U.S. states and territories are currently eligible to apply for the EIDL due to Coronavirus (COVID-19).

Who is eligible?

  • Business, cooperative, ESOP, or tribal small business concern with 500 or fewer employees as well as small business concerns, private non-profits and small agriculture coops,
  • Any individual sole proprietor, with or without employees, or independent contractor.

We are owned by a private equity group, venture capital firm or family office, are we eligible?

Based on the current guidelines and limited waiver of affiliation rules, it would appear that private equity groups and their portfolio companies would be subject to the affiliation rules and would likely not be eligible for an EIDL loan

I am a new business, am I eligible to participate?

The normal one-year operational requirement is waived for businesses in operation on January 31, 2020.

What is the deadline to apply?

The application filing deadline is December 31, 2020. It is expected that the loans will be serviced on a first come first serve basis.

Maximum Loan Amount

What is my potential loan maximum amount?

Loan amount of $2 million which includes the emergency grant funding of $10,000.

Allowable Use of Proceeds

What can I use the loan proceeds for?

Any normally allowed purpose for 7(b)(2) disaster loans including, paid sick leave to employees unable to work due to direct effects of the COVID-19, maintaining payroll to retain employees during business disruptions or substantial slowdowns, meeting increased costs to obtain materials unavailable from the applicant's original source due to interrupted supply chains, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses.

Repayment terms

What are the repayment terms?

The maximum repayment term is 30 years. Repayment is determined based on the borrower’s ability to repay.

What will be the interest rate?

The balance will be charged interest not to exceed 3.75 percent for a qualified business and 2.75 percent for non-profits.

Is the loan forgiven?

The emergency grant advance of up to $10,000 is not subject to repayment even if loan is subsequently denied (advance will reduce any loan forgiveness amount for a loan for payroll costs made under PPP loan program). The remainder of any EIDL loan is not subject to forgiveness.

Are the payments deferred for a period of time?

Yes, the first payment on the EIDL issued due to COVID-19 will be automatically deferred for one year.

For questions or additional information, please contact CARESActQuestions@dhg.com.

ABOUT THE AUTHORS

Denny Ard
Managing Partner, DHG Solutions Lab
Denny.Ard@dhg.com

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