How Getting a Small-Business Loan Is Made Easier With the EIDL Program

By: on April 23, 2020

Small businesses create two-thirds of net new jobs in the U.S. They also contribute a whopping 44% to the overall U.S. economic activity. However, these figures, just like everything else, have taken a hit due to the COVID-19 pandemic.

To restore some order and repair damages, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. The CARES Act has provisions and loans to help small businesses (as well as households, state/local governments, and financial markets) stay afloat.

It has introduced two major types of small-business loan programs: the Economic Injury Disaster Loan (EIDL) program and Paycheck Protection Program (PPP). EIDL aims to cover six months of operating expenses, while PPP takes care of employee payroll for eight weeks.

With the first round of funding exhausted, the U.S. Small Business Administration (SBA) has paused acceptance of new applications for both the programs.

However, Congress is all set to release a $470 billion stimulus deal along with another $370 billion to support small-business funding programs. This means that fresh funds worth $310 billion and $60 billion are expected to be added to the PPP and EIDL programs, respectively.

In this article, we’ll answer your questions about the EIDL program in detail and guide small businesses on how to apply for it.

What is EIDL and how has it evolved under the CARES Act?

The SBA’s EIDL is a relief program that supports small businesses and private nonprofits. The EIDL program has been modified under the CARES Act to now provide emergency grants, with lower interest rates, to small businesses across all 50 states (until December 31, 2020).

Previously, only business owners, homeowners, and renters from certain federally declared natural disaster-prone areas could apply for an EIDL. The disasters included hurricanes, floods, and wildfires. Since COVID-19 has impacted the entire U.S. (turning the whole country into a disaster zone), small businesses from across states are now eligible to apply for an EIDL. (Eligibility conditions and qualifiers apply.)

What can small businesses expect from the new EIDL program?

Here are a few things you can expect from the modified EIDL program:

  • You can receive working capital of up to $2 million at an interest rate of 3.75% (2.75% for nonprofits).
  • The loan term can now last up to 30 years, which will offer some relief at the time of repayment. You can request an emergency grant advance of up to $10,000 and receive it within just three days of application.
  • The grant advance will be waived off if utilized to cover paid leaves, payroll maintenance, mortgage, and lease payments.
  • If your loan requirement is more than the approved amount, you can request an increase by submitting additional supporting documents. If it’s less, you can request a reduction as well.
Keep in mind that the loan amount you’ll receive is based on actual reported economic injury suffered by your business since January 31, 2020, compared to 2019 operations/financials. If your loan request is denied, you’ll have to provide new information and submit a written request for reconsideration within six months.

How can a small business be sure it’s fit to apply for EIDL?

You can apply for an EIDL only if your business was operational as of January 31, 2020. Other major qualifiers and disqualifiers are explained below.

list of businesses eligible for EIDL

list of businesses not eligible for EIDL

If you’re a business with over 500 employees, you may still be eligible for EIDL if your business qualifies as “small” under the SBA Size Standards. Check eligibility here.

How to apply for EIDL

You can apply for an EIDL and the $10,000 advance here. An SBA loan officer will ensure that all necessary information has been provided so that your loan application is successful.

To receive loan approval, your business must have an acceptable credit history and demonstrate an ability to repay the loan. If you receive the EIDL advance, but your loan application doesn’t get approved, you aren’t required to repay the advance grant. Subsequently, you don’t have an obligation to accept an approved loan amount if you no longer need it.

What should and shouldn’t be done with EIDL money?

You can’t use the EIDL amount for just anything. Here are some do’s and don’ts:

do's and dont's for eidl amount

Learn more about what can you use an EIDL Loan for:


If you’ve already received an EIDL between January 31 and April 3, 2020, you can apply for a PPP loan instead. However, both loans should be used to meet different expenses. For instance, if you’ve previously used the EIDL amount to cover employee wages, you can’t use the PPP amount for the same.

What else to know about EIDL

Considering these are unprecedented times, you’re likely to have additional doubts and concerns. Here are a few things that are helpful to know:

  • You don’t need any collateral for loans below $25,000. By definition, collateral is an item of value that is accepted as security against a loan amount.
  • If you have an ongoing SBA-backed disaster loan from a previous disaster, you can rest assured, as repayments have been deferred through December 2020.
  • There’s no need for personal guarantee on loans up to $200,000 through December 31, 2020.
  • You’re allowed to refinance an EIDL into a PPP loan. If you get the PPP loan, the $10,000 EIDL advance grant will be deducted from the PPP forgiveness amount.
  • Amount outside of the advance grant in an EIDL can’t be forgiven unless refinanced later under a PPP loan.

What to do next

Now you have substantial information to make an EIDL application. If you still need directions, here are a few things you can do to make the process simpler:

  • Get in touch with your legal, tax, and banking advisors to evaluate if you qualify for an EIDL at present.
  • Collect company documents, such as certifications, financial statements, IRS Form 4506 T, and company agreements.
  • Contact your local small-business development center. Locate it here.

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