Editor's note: This column is part of a series featuring Lakeshore experts offering advice to small businesses as they navigate their recovery through the COVID-19 crisis.
 

As a part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Small Business Administration's Economic Injury Disaster Loan (EIDL) program offers economic support for eligible small businesses and non-profits that have been negatively impacted by COVID-19. The EIDL can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.

 

Here are the answers to questions about the EIDL that should help you better understand the program and what you need to know to apply. 

What is the EIDL?

The EIDL is a long-term, low-interest, fixed-rate loan that provides assistance to small businesses impacted by COVID-19. Loan proceeds help can help your business meet the necessary financial obligations that you could have met had the disaster not occurred. EIDLs do not replace lost sales or revenue.

How much can I borrow?  

The actual loan amount will be based on the SBA’s calculation of the economic injury your business has sustained.  Loans are capped at $150,000.

What are the terms?

• Interest rate is 3.75% (2.75% for non-profits)
• There are no fees or closing costs.
• The maximum term is 30 years; however, terms are determined on a case-by-case basis based on each borrower’s ability to repay.
• The SBA requires collateral for all loans over $25,000. They will not decline a loan for lack of collateral, but it will require the borrower to pledge collateral that is available. 
• There is no personal guarantee.
• Payments are deferred for one year.
• If your loan is approved you are not obligated to accept the funds.

What is the EIDL Advance?

The EIDL Advance provides up to $10,000 ($1,000 per employee) in emergency funds to your business.  The advance does not need to be repaid, even if your business does not qualify for the EIDL or you choose not to take it.   

Update (July 13): All available funds for the EIDL Advance program have been allocated. By law, SBA is not able to issue EIDL Advances once program funding has been obligated and is no longer available. EIDL loan applications will still be processed even though the Advance is no longer available.

The amount of the EIDL Advance was determined by the number of employees indicated on the EIDL application at $1,000 per employee, up to a maximum of $10,000. The EIDL Advance does not have to be repaid. Recipients did not have to be approved for an EIDL loan in order to receive the EIDL Advance, but the amount of the loan advance is be deducted from total loan eligibility.

How do I apply?

EIDL funds come directly from the U.S. Treasury, not from your bank. You apply directly here on the SBA’s website.   

Is my business eligible?

If your business has under 500 employees, you are considered a small business (with some exceptions) and can qualify for the loans. The business can be a sole proprietorship, LLC, corporation, or private non-profit.  

Organizations that are not eligible include religious and charitable organizations, gambling concerns (Ex: Concerns that derive more than 1/3 of their annual gross revenue from legal gambling activities), and casinos and racetracks.

What can the funds be used for?

EIDL assistance can be used for most working capital expenses, including: 

• Maintaining payroll
• Providing paid sick leave to employees
• Purchasing inventory
• Making rent or mortgage payments 
• Paying utilities
• Repaying obligations that cannot be met due to revenue losses
• The EIDL may not be used for refinancing, expansion, growth of any kind, or infrastructure improvements.

Is the EIDL forgivable?

No, the EIDL is a standard loan that does need to be repaid.  Only the EIDL Advance amount does not need to be repaid.

I already have the PPP (Paycheck Protection Program) Loan?  Can I still get apply for the EIDL?
Yes! You can take full advantage of both of these programs to support your business. There are just a few things to keep in mind:
You cannot use funds from both loans for the same purposes.  For example, if you use the PPP to pay July’s payroll, you will have to use the EIDL for a different payroll period, or a different working capital expense. 

If you have both an EIDL Advance and PPP loan, the EIDL Advance is deducted from the forgivable amount of a PPP loan.

What is the cut-off date to apply for the EIDL?

You will be able to apply for the EIDL through December 31, 2020, or until the funds for the program run out.
How soon can I get the money from the loan?

Loan processing times vary, but we have been seeing organizations get their funds in as little as 2-3 weeks from the day they apply.  

How can I check on the status of my loan application?

Call the SBA directly to check on the status of your application at 800-659-2955 or email at [email protected].
The EIDL can help your businesses stay afloat during the current situation. But it will also require planning and financial analysis to make sure the loan will work for you in the long run.   

The Michigan SBDC is here to help you respond and plan for the future of your business. Please contact us if you need help determining if the EIDL is right for your business, need assistance in completing the application, or have questions regarding the economic recovery process.

Liz Hoffswell is a certified business consultant for the Michigan Small Business Development Center, which is based at the GVSU Seidman School of Business in Grand Rapids. She has more than 25 years of experience in management, operations, finance, sales, and marketing, working with organizations of all sizes. Additionally, Hoffswell is a serial entrepreneur and has started several small businesses throughout her career.

If you have a topic or question you would like Liz to address, send an email to Managing Editor Shandra Martinez at [email protected].

More Liz Hoffswell columns:

Expanding online presence can help businesses succeed now, come back stronger

What small business owners need to know about stimulus loans

How to help your restaurant survive the COVID-19 pandemic

This article is part of The Lakeshore, a new featured section of Rapid Growth focused on West Michigan's Lakeshore region. Over the coming months, Rapid Growth will be expanding to cover the complex challenges in this community by focusing on the organizations, projects, programs, and individuals working to improve conditions and solve problems for their region. As the coverage continues, look for The Lakeshore publication, coming in 2020.