EIDL – An SBA Loan Breakdown

by | Dec 8, 2021 | Small Business | 0 comments

Natural disasters often happen without a moment’s notice – tornadoes, blizzards, earthquakes, and even COVID-19, can affect a business. When a company takes a brutal hit from a natural disaster, it takes a lot to keep from closing its doors permanently. Thankfully, the U.S Small Business Administration has a program set up to keep affected businesses alive during an unprecedented time.

This article will take a closer look at SBA-backed EIDL loans and how they can help certain businesses. 

Types of Disaster Loan Assistance Programs:

What is an EIDL loan?

By definition, Economic Injury Disaster Loans, or EIDL, is a Small Business Administration (SBA) disaster loan that provides Federal assistance to non-farm, private sector businesses. Luckily, this program is not limited to just small companies. The EIDL program can provide up to $2 million of financial assistance to small businesses or private, non-profit organizations that have felt the adverse substantial economic injury as the result of a declared disaster. 

Use this website to learn if your business is within a declared disaster area. 

The amount funded ultimately depends on the amount of economic injury. These funds help businesses maintain the working capital needed to run during the recovery period. While the acquired funds depend on the damages, the loan itself has a maximum loan length of 30 years with an interest rate that cannot surpass 4%. The payment and repayment penalties are determined by a business’s ability to pay. 

COVID-19 Economic Injury Disaster Loan

The SBA also provided small businesses with a program targeting those affected by COVID-19. The COVID-19 Economic Injury Disaster loan allowed small business owners, including agricultural industries, ad non-profit organizations, to apply for financial assistance. The loan itself was a low-interest, fixed-rate, long-term loan used to help overcome the effects of the pandemic by providing the working capital needed to maintain operations. 

Initially, the COVID-19 EIDL had a maximum of 150,000 due to the high number of applicants needing relief. Like the normal EIDL, funding varied on damages and was capped at $2 million. The SBA later increased the limit to $500,000 in April 2020 and $2 million in their more recent policy changes

While acquiring the loan is helpful, many have reported a longer wait time depending on the total of funds. According to Inc.com, businesses waited three weeks for approval for funds under $500,000 and six weeks for over $500,000. 

Businesses met COVID-19 requirements if they met any of the following standards:

  • Has no more than 500 employees
  • An agricultural enterprise with no more than 500 employees
  • An individual who operates as a sole proprietor with no more than 500 employees
  • A cooperative that has no more than 500 employees
  • A business, including an agricultural cooperative, aquaculture enterprise, nursery, or producer cooperative (but excluding all other agricultural enterprises), with more than 500 employees under SBA size standards. 
  • A private nonprofit organization that is a non-governmental agency or entity that currently has an effective ruling letter from the IRS granting tax exemption under sections 501(c), (d), or (e) of the Internal Revenue Code of 1954, or satisfactory evidence from the State that the non-revenue producing organization or entity is a nonprofit one organized or doing business under State law, or a faith-based organization.*

Please note: First Union Lending does not work with non-profit organizations at this time. 

  • A business that, together with affiliates, has more than 500 employees and is assigned a NAICS code beginning with:
    • 61 Educational Services;  
    • 71 Arts, Entertainment and Recreation; 
    • 72 Accommodation and Food Services;  
    • 213 Support Activities for Mining; Industry group;  
    • 3121 Beverage manufacturers;  
    • 315 Apparel Manufacturing;  
    • 448 Clothing and Clothing Accessories Stores;  
    • 451 Sporting Good, Hobby, Book and Music Stores;  
    • 481 Air Transportation;  
    • 485 Transit and Ground Passenger Transportation;  
    • 487 Scenic and Sightseeing Transportation;  
    • 511 Publishing Industries (except Internet);  
    • 512 Motion Picture and Sound Recording Industries;  
    • 515 Broadcasting (except Internet);  
    • 532 Rental and Leasing Services; and  
    • 812 Personal and Laundry Services
  • employs not more than 500 employees per physical location and has no more than 20 locations (including the number of sites your affiliates have, if any). 

The funds have been exhausted and are no longer available at this time – only those who acquired the EIDL loan can request an increase, but lenders are currently not accepting new applications. 

Use of EIDL Loans

Even when disasters hit, the bills do not stop. Businesses owners who have acquired funds from EIDL loans use the working capital to fund normal business operations. Business operations include running payroll, purchasing equipment, paying off debt, and necessary repair. In September, significant enhancements to the EIDL allowed businesses to prepay commercial debt and make payments on federal business debt. 

Denied an EIDL Loan?

Though the SBA created the program to provide funding to almost any business, businesses may reject some for many reasons. One main reason for rejection is running an ineligible business; the SBA often does not align with companies that conduct the following activities:

  • Illegal activities
  • Loan packaging
  • Multi-level sales distribution
  • Gambling
  • Investment or lending
  • Speculation

If your business participates in these activities and you recently inquired about an SBA EIDL loan, you more than likely do not qualify. The SBA will also reject your request for EIDL funding if your credit score does not meet their requirements or if any provided information isn’t verifiable. You can also receive a denial if the business owner is not a U.S. citizen or legal resident, or if your business has not experienced an economic injury. 

If you received a denial, you have until December 31, 2021, to file for reconsideration with the SBA directly. This allows six months from the date of decline for reconsideration and 30 days forms the date of reconsideration decline for appeals – unless funds are no longer available. 

If you recognize you missed a deadline, do not fret – online lenders like First Union Lending are available to help provide you with alternative loan options when the times get tough. Several loan options are available for many small businesses needing working capital to maintain operations. 

First Union Lending is here to help!

We want to see your small business thrive. Our loan programs are designed to help you achieve your goals. We provide fast and flexible loans – Call today to see how we can help you! If you recently experienced an EIDL rejection, we will find you an alternative loan to help your business.