Your Guide to the Economic Injury Disaster Loan

Media headlines hint trouble with relief monies promised to small businesses. Those funds seem to be quickly running dry. But entrepreneurs hope to see lawmakers approve $250 million in additional support. The money funds the CARES Act’s Payroll Protection Program (PPP). In the meantime, business owners need to apply for aid from the Small Business Administration (SBA) Economic Injury Disaster Loan (EIDL) program. The program already existed. But it received a boost in availability and terms from the CARES Act. Check out this primer on what you need to know.

Expanding Availability

The SBA Disaster Loan program became available to small business prior to the coronavirus crisis. But monies and approvals ended up less forthcoming than the new EIDL promises to be. In fact, in all of 2019 the SBA only guaranteed $28 billion worth of loans. As of mid-March 2020, the SBA revised criteria for states or territories seeking an economic injury declaration related to the coronavirus (COVID-19). The new program assures applicants:

• A faster, easier qualification process for states seeking SBA disaster assistance. Previously, the SBA required states impacted by disaster to provide documentation certifying that at least five small businesses had suffered substantial economic injury as a result of a disaster, with at least one business located in each declared county/parish. Under the revised criteria, states are only required to certify that at least five small businesses within the state have suffered substantial economic injury, no matter where those businesses are located.
• Expanded and statewide access to SBA disaster assistance loans for small businesses. SBA disaster assistance loans are typically only available to small businesses within counties identified as disaster areas by a state Governor. Under the revised criteria, disaster assistance loans are available statewide following an economic injury declaration. This will apply to current and future disaster assistance declarations related to the coronavirus.

Historically, Economic Injury Disaster Loans have been acquired for those affected by major natural disasters such as Hurricane Sandy and Hurricane Harvey. The coronavirus pandemic is the first non-physical disaster authorized for the EIDL program.  

EIDL Details

The CARES Act relaxed the broader state requirements. It also waives:

• The necessity for personal guarantees on EIDL loans less than $200,000. 
• The requirement for the borrower to have been in business for at least a year.
• The requirement that borrowers are unable to obtain credit from other sources.

Temporarily, the CARES Act also increases the amount of funding available through December 31, 2020. Small businesses may apply for an EIDL loan of up to $2 million. The loan features a 3.75% interest rate for small businesses and 2.75 percent for nonprofits. And it features a maturity of up to 30 years. Lenders determine the actual loan terms on a case-by-case basis. The CARES Act also provides for a $10,000 emergency grant. And lenders can fund it within three days of the application. But it makes up the only forgivable portion of the loan. Applicants receiving the $10,000 emergency funding, but not approved for the entire EIDL, need not repay the advance. 

If You Still Have Questions Read on

Still have questions? Hopefully, this helps make sense of it all.

1. Where does the money come from? Funds come directly from the U.S. Treasury, although you apply through the SBA.
2. Are there any fees to apply? No, the application process is free.
3. Do I have to take the loan if I get approved? There is no obligation to accept the loan.
4. What if I can’t start paying the loan back right away? There is a six-month deferment period available.
5. What can I use the loan for? The loan must be used for fixed debts such as rent, equipment leasing, etc., payroll and other accounts payable.
6. What is considered a small business? The EIDL is for businesses with less than 500 employees.
7. Do I have to have employees to apply? No, for the EIDL you can be an independent contractor or a sole proprietor with no employees.
8. What if I already have an SBA Disaster Loan? You can still apply and qualify for an EIDL for the Covid-19 disaster. The loans can’t be consolidated.

Needed Documentation

What kind of documentation do I need to apply? Per the SBA Disaster Loan Application Portal, you will need:

1. SBA Form 5 Loan application (online form)
2. Tax Information Authorization (IRS Form 4506-T), completed and signed by each applicant, each principal owning 20 percent or more of the applicant business, each general partner or managing member; and, for any owner who has more than 50 percent ownership in an affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management 
3. Complete copies, including all schedules, of the most recently filed Federal income tax returns for the applicant business; an explanation if not available 
4. Personal Financial Statement (SBA Form 413) completed, signed, and dated by the applicant, each principal owning 20 percent or more of the applicant business, and each general partner or managing member 
5. Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used) 

All the above-mentioned forms are available on the SBA Disaster Loan Application Portal.

Help With EIDL Application

The SBA and SBA lenders got flooded with applications. And so far, small business owners remain proactive by filing applications as soon as possible. If you are able to apply for the EIDL directly through the SBA website, we strongly urge you to do so soon. If you’d like some assistance in the process, CorpNet can assist you in preparing and submitting your EIDL application to the SBA on your behalf.

CorpNet can assist any small business owner as a third-party consultant SBA loan packaging service and submit a small business owner’s application on their behalf for the Economic Injury Disaster Relief Loan (EIDL) program and the Economic Injury Disaster $10,000 Loan (EIDL) Advance for a minimal service fee of $349.

CorpNet also assists small business owners as a third-party consultant SBA loan packaging service. And we submit a small business owner’s application on their behalf for the Paycheck Protection Program (PPP) Disaster Relief Loan at no cost.

You won’t find anyone (including CorpNet) to guarantee you loan approval or funds. And processing time remains at the mercy of the government. Your application vies with thousands or millions of others for attention. The SBA says funds become available following a successful application. Expect a wait of several business days for funding of the $10,000 advance. Information provided by the U.S. Department of Treasury says direct deposit follows. Allow 4 to 6 weeks processing time for actual funding of your loan. Unless further information has been requested by an SBA loan processor.

We understand the stress and challenges small business owners face today. We offer help so you don’t get overwhelmed. Read more on how CorpNet Helps Businesses File for Coronavirus Relief.

CorpNet offers business formations, filings, state tax registrations, and corporate compliance services in all 50 states. Express and 24 hour rush filing services available upon request. Click here to learn more.

Image: Depositphotos.com

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