Most small business owners know that the CARES Act, through the Small Business Administration, offered financial relief through two targeted loan packages—the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL) program.

Passage of the Consolidated Appropriations Act (CAA), 2021 on Dec. 27, 2020, extended the EIDL through Dec. 31, 2021, and created a new Targeted EIDL Advance program.

The COVID-19 EIDL program, originally scheduled to end Dec. 31, 2020, has been extended through Dec. 31, 2021, with passage of the Consolidated Appropriations Act (CAA), 2021. The original EIDL Advance expired July 11, 2020, and is no longer available. The CAA did create a new Targeted EIDL Advance but that program is only available to previous EIDL applicants in low-income areas, as identified by the Small Business Administration (SBA).

The American Rescue Plan of 2021 provides $15 billion in additional funding for the special Targeted EIDL Advance grants. It directs that Targeted EIDL Advance funds will not be included in taxable income.

Here's what you need to know to apply for an EIDL loan and information about the new Targeted EIDL Advance, in case you qualify.

Key Takeaways

  • Although the original EIDL Advance program has expired, EIDL loans will continue to be available through Dec. 31, 2021.
  • You cannot apply for the new EIDL Targeted Advance which is only available to select applicants in low-income communities.
  • If you qualify for a new EIDL Targeted Advance, the SBA will notify you.
  • You must qualify for a COVID-19 EIDL as a small business by number of employees.
  • The maximum loan amount, based on economic injury suffered, is $500,000 as of April 6, 2021.
  • Some loans approved prior to April 6 will be eligible for an increase and borrowers will be contacted by the SBA.
  • The normal EIDL application has been streamlined and should take about 2 hours.

Qualification

To qualify for an EIDL, your business must meet the SBA definition and size standards of a small business, be located in the United States or a U.S. territory, and have suffered working capital losses due to the Coronavirus pandemic.

Definition standards

According to the Small Business Administration a small business

  • Is organized for profit.
  • Has a place of business in the U.S.
  • Operates primarily within the U.S. or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor.
  • Is independently owned and operated.
  • Is not dominant in its field on a national basis.

Size standards

If your business employs 500 or fewer people, you are likely considered a small business and therefore eligible for this program. However, number of employees is higher for businesses in some industries. The SBA Table of Small Business Size Standards shows whether your industry allows more employees. References to alternate use of receipts (income) instead of number of employees do not apply for the COVID-19 EIDL.

Location and business type standard

Since the coronavirus (COVID-19) pandemic applies to all 50 U.S. states; Washington, D.C.; and U.S. territories, virtually any small business in the United States and its territories qualifies by location.

In addition to what most people would consider a business, these standards and loan availability options also apply to sole proprietorships, independent contractors, and self-employed persons.

Loan Approval Conditions

The following loan approval conditions reflect some relaxing of traditional EIDL loan stipulations:

  • You can borrow up to $200,000 without a personal guarantee.
  • First-year tax returns are not required and approval can be based on credit score.
  • You do not have to prove you could not get credit elsewhere.
  • Loans of $25,000 or less require no collateral. For loans above $25,000, a general security interest in business assets can be used. You must allow the SBA to review your business tax records.

April 6, 2021

As of this date, EIDL loans up to $500,000 covering 2 years of economic hardship are available.

What's Available

COVID-19 EIDLs are designed to provide economic relief if your business is currently experiencing a loss of revenue due to the pandemic.

As of April 6, 2021, you can apply for an EIDL of up to $500,000 covering 24 months of economic injury to pay expenses such as fixed debt and payroll costs. Some loans processed prior to that date may be eligible for an increase and those borrowers will be notified by the SBA.

The interest rate for EIDL loans is 3.75% (2.75% for non-profits) and the loan term can be as long as 30 years. The COVID-19 EIDL includes an automatic one-year deferral on repayment, though interest begins to accrue when the loan is disbursed.

If you qualify for and received a Targeted EIDL Advance, the funds you receive are fully forgivable. The amount you receive will be up to $10,000, depending on the amount, if any, you received from the original EIDL Advance program. The section below titled New Targeted EIDL Advance provides additional detail on the new advance program including conditions under which you may qualify.

Streamlined Application

EIDLs are funded by the Small Business Administration so you make your application with the SBA. For the COVID-19 version of EIDL, the application process has been streamlined; the SBA says it should take you two hours and ten minutes or less to complete the application.

Disclosure

The application starts with a disclosure section that describes the loan and states that the information collected will be used to determine whether you are eligible. It includes a warning that if you do not provide all requested information, your loan will not be processed, as well as a reminder that the SBA is relying on your self-certification of eligibility to receive the advance (if you apply) and that there is a perjury penalty if you are not truthful. After verifying your eligibility on the Disclosure page, you will continue to a Business Information section.

Business Information

This section is the longest and requires your income statement as of January 31, 2020. It is important to note that not all answers are required. Sections marked with a red star must be filled out. If not so marked, only fill them out if they apply to your business.

Business Owners Information

Here you will need to indicate whether your business is fully owned by another business. If owned by individuals, you need to provide information on each owner with a 20% stake or more. Information requested will include:

  • Home address
  • Phone number
  • Social Security number
  • Date and place of birth
  • Citizenship status

Additional Information

This section includes questions about criminal charges against any owners, then proceeds to submission of the application.

Also double-check your bank information to ensure a smooth process when it comes to direct deposit of your funds.

The application can be found on the SBA Disaster Assistance web page. The SBA has extended the application deadline to Dec. 31, 2021.

Don't confuse the new Targeted EIDL Advance with the former EIDL Advance, which is no longer available. You cannot apply for the Targeted EIDL Advance. If you qualify, the SBA will contact you.

New Targeted EIDL Advance

The new COVID-19 Targeted EIDL Advance is separate from the EIDL loan and and not related to the former EIDL Advance, which is no longer available. The Targeted Advance was signed into law Dec. 27, 2020, as part of the Consolidated Appropriations Act (CAA), 2021 and provides targeted "businesses located in low-income communities with additional funds to ensure small business continuity, adaptation, and resiliency."

This program provides up to $10,000 in forgivable funding to previous EIDL applicants who:

  • Are located in a low-income community as defined by section 45D(e) of the Internal Revenue Code; AND
  • Can demonstrate more than 30% reduction in revenue during an 8-week period beginning on March 2, 2020, or later; AND
  • Previously received an EIDL Advance for less than $10,000.

If you meet all of the qualifications above AND:

  • Received no advance due to lack of available funding; AND
  • Have 300 or fewer employees,

You may also be eligible for the Targeted EIDL Advance.

Importantly, you do not need to do anything to receive these funds. If you qualify, the SBA will reach out to you via official government email with an @sba.gov ending. The SBA warns you not to send sensitive information to any email address that does not have the @sba.gov ending.

 An EIDL loan can be refinanced into a PPP loan.

You Can Apply for a PPP Loan, Too

SBA guidance allows you to apply for a PPP loan in addition to an EIDL, so long as you don't use the funds from each loan for the same expenses. For example, if you decide to apply for a PPP loan and use those funds strictly for payroll, you cannot subsequently use funds from an EIDL for payroll, as well.

21 days

The minimum length of time to receive your loan funds if you are approved.

When to Expect Your Funds

The EIDL Loan process takes a minimum of 21 days to complete according to the SBA. Not surprisingly, the actual length of time is on a case-by-case basis, depending on whether there are questions or additional information is required.

The Application Process in Order

  • Apply at DisasterLoanAssistance.sba.gov.
  • Receive Loan Quote. (This does not mean you are approved.)
  • Choose your loan amount up to the loan quote maximum.
  • A Loan Officer will review your application and ask for more information if needed.
  • A decision will be made and you will either be approved or your application declined.

IF APPROVED:

  • You will receive an Approved email from @SBA.org and asked to choose your loan amount and sign documents.
  • Your loan funds will be transferred to your bank within 5 to 10 business days.

IF DECLINED:

  • You will receive a Declined email from @SBA.org.
  • You can request reconsideration in writing within six (6) months of the date of being declined.