A $10,000 Gift to Small Businesses
All small businesses and the self-employed suffering from the pandemic should apply for this forgivable SBA Economic Injury Disaster Loan (EIDL). Amongst the frenzy and chaos of applying for the Payroll Protection Plan most small business owners have overlooked it. You can apply for up to $2 Million, but the forgivable amount is $10,000. The application process is way simpler and best, of all, you may well qualify for both this and the PPP.
Overview
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid.
Eligibility
The SBA’s Economic Injury Disaster Loan provides vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic.
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(c)(19) veterans organizations affected by COVID-19.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.
The Benefits of the EIDL vs. PPP
| Economic Injury Disaster Loan (EIDL) | Paycheck Protection Program (PPP Section 7(a) | |
| Administrator | SBA | SBA Approved Financial Institutions |
| Amount of Loan | Up to $2 million | Lesser of $10 million or 2.5 times average monthly payroll costs (not including independent contractor payments) incurred during calendar year 2019 |
| Calculations for seasonal and new business can vary | ||
| Interest Rate | For- Profit 3.75% | Non-Profit 2.75% | 1% |
| Term/ Maturity | Up to 30 years | 2 years |
| Deferral | 12 months (interest accrues during deferment) | 6 months (interest accrues during deferment) |
| Prepayment | Prepayment is eligible | Prepayment is eligible |
| Eligibility* | Small businesses in all U.S. States and territories, including sole proprietors or independent contractors | Small businesses in all U.S. States and territories, including sole proprietors, independent contractors and eligible self-employed individuals |
| Internationally owned organizations located in the U.S. | Internationally owned organizations located in the U.S. | |
| Private nonprofit organizations | 501 (c)(3) nonprofit organizations | |
| Small agricultural cooperatives | 501 (c)(19) veterans organizations | |
| Tribal small business concerns | Tribal small business concerns | |
| ESOPs | Fewer than 500 employees in most instances, more in certain industries* | |
| Fewer than 500 employees* | ||
| Usage | Fixed Debts, payroll and related benefits**, accounts payable and other expenses that cannot be paid because of the disaster’s impact | Payroll and related benefits** Interest on mortgage payments or other debts, rents and utilities |
| Cannot be used for | Refinancing of debt, payment of other SBA loans or lenders, tax penalties, civil fines, repairs of property or other physical damage, pay dividends or distributions to owners or partners | Limited to uses noted above |
| (EIDL may be eligible to be refinanced into a PPP loan) | ||
| Collateral | If available, collateral will be taken on loans greater than $25,000 | No collateral from business or its owners |
| Loan forgiveness and grant eligibility | Emergency grant up to $10,000 | Eligibility is based on specific requirements |
| (EIDL may be eligible to be refinanced into a PPP loan) | Forgiveness*** available on a portion of the loan proceeds if employers retain employees during specified period | |
| Forgiveness of non-payroll allowable expenses is limited to 25% of total forgiveness | ||
| Guarantees | Waives requirement of personal guarantees on loans less than $200k | None |
| Can I Apply Now? | Application process and loans are available now | Application process and loans are available now |
