The Small Business Administration is a superb resource for small business owners, connecting small businesses that wouldn’t otherwise be eligible for a funding to lenders that provide competitive rates and favorable repayment terms. One program that’s been obtaining a lot of attention considering the COVID-19 pandemic is the SBA Economic Injury Disaster Loan (EIDL).
The EIDL program is restricted to small businesses which have faced financial hardship as a result of a tragedy. Because President Donald Trump declared a national disaster because of the coronavirus, many small business owners will now qualify for this funding to keep their businesses afloat.
If your business has been impacted by the coronavirus, keep reading to explore how to apply for these low-cost loans so you can get the financial relief you need.
Need more information and resources aimed toward small business owners during this Coronavirus (COVID-19) pandemic? Take a look at the resource hub we've created.
How A fiscal Injury Disaster Loan & Emergency Advance May help Your Small Business
An EIDL has few restrictions how funds are used. Your loan can be used capital to exchange lost revenue as a result of the coronavirus. You can use your loan for payroll expenses, operational costs, or the rent or mortgage for the commercial building. You can’t, however, use funds to pay off existing debt, business expansion, or dividends.
The maximum amount borrowed available through this program is $2 million. However, your company may qualify for less, as borrowing limits are determined by the amount of economic injury you’ve suffered.
Businesses may shy away from applying for one of these simple loans because they’ve heard about the lengthy application. While it's true that funding may take several weeks or longer, the Coronavirus Aid, Relief, and Security Relief (CARES) Act makes it easy to receive up to $10,000 in only days through the Economic Injury Disaster Loan Emergency Advance program. This provides you use of quick funding that is forgivable. Quite simply, the loan advance does not have to be repaid. The total amount that you receive as a loan advance is dependant on your number of employees. You could get $1,000 per employee for a total advance up to $10,000.
The interest rate for smaller businesses is 3.75%. Private, non-profit organizations receive interest rates of 2.75%. The maximum repayment terms for the EIDL is 3 decades. Loans of $25,000 or less don't have to be secured with collateral. Personal guarantees for loans as much as $250,000 happen to be waived through December 31, 2022.
How To try to get An EIDL Loan
If your enterprise is struggling, an EIDL’s low interest rates, high borrowing limits, and lengthy repayment terms might be right for you. If you’re thinking about trying to get financing, continue reading to learn what you ought to do today to avoid delays in processing and approval of the application.
1) Make sure you Be eligible for a Funding
Not every small business will qualify to get a disaster loan, so ensure that you meet all qualifications before submitting your application. To qualify, you must meet the SBA’s small company size standards. For many businesses, this simply means that you need to have less than 500 employees. However, there may be additional guidelines according to your specific industry.
You must also have a solid credit rating and history to qualify. You must also show that you will be able to settle the loan.
Businesses involved with criminal activity, lobbying businesses, certain agricultural businesses, gambling businesses, and government entities are ineligible for the EIDL program. Principal business owners with at least a 50% stake which are a lot more than 60 days behind on child support payments are also ineligible.
2) Complete Your Application
There are a couple of ways to submit your EIDL application. The simplest is submitting a web-based application through the SBA website. If you’d prefer to mail in your application, you can do so by downloading and completing SBA Form 5: Disaster Loan Business Application and Form 1368: Additional Filing Requirements. The SBA estimates it must take roughly 2 hours to accomplish the application, so make sure you put aside enough time to try everything correctly.
If you have any questions about the EIDL or need assistance submitting a credit card applicatoin, you are able to contact SBA disaster loan customer service by telephone or email. You may also contact your local SBA office for assistance. In some cases, an SBA Preferred Lender can also be in a position to offer assistance. When contacting the SBA or Preferred Lender, you may also question other types of funding which may be a choice for the business.
When completing the application, you’ll need to provide details about yourself as well as your business. Any owner with at least a 20% stake in the industry and general partners should also provide their information for that application for the loan. A few of the information you should expect to provide includes:
- Personal Information: Legal name, mailing address, phone number, federal EIN
- Business Information: Business name, address, entity type, type of business, quantity of employees
- Management Information: Names, titles, percentage owned, social security numbers, DOBs
- Financial Information: Monthly sales, optional financial forecast
You are usually necesary to submit more information at any time throughout the application, so make sure that you’re prepared to respond promptly to any requests from the SBA.
One additional point to note is you must indicate that you want to get the Emergency Advance in your application to become considered for a forgivable advance up to $10,000.
3) Gather Documentation
In addition to a completed application, you also have to submit documentation to aid your demand for EIDL. The documentation that should be submitted together with your application includes:
- Federal Income Tax Returns: You have to submit your last three federal income tax returns, together with all corresponding schedules. Should you haven’t filed three tax returns, submit any you have.
- IRS Form 8821: The application also necessitates the submission of IRS Form 8821 – Tax Information Authorization. General partners and owners with at least a 20% stake in the industry should also complete and sign this form.
- Balance Sheet: A balance sheet dated within 3 months of trying to get the EIDL is required as part of the application.
- Profit & Loss Statement: A current P&L statement should be included with your application.
- Schedule Of Liabilities: A schedule of liabilities is yet another financial document required when applying for the EIDL.
- Affiliate Information: If applicable, the government tax returns and IRS Form 8821 of all affiliates should be submitted.
Be aware that this is the minimum required for your EIDL application. The SBA may request additional documentation and forecasts to be able to approve the loan.
4) Keep In Contact
As mentioned earlier, there might be additional documentation and knowledge needed in to process your loan. Make sure that you respond as quickly as possible and supply all of the requested information to be able to expedite the borrowed funds process.
Also, don’t hesitate to contact the SBA or one of its local offices at any time in the process if you want assistance filling out your forms, have questions regarding requirements, or need other advice and guidance.
Avoid These Common Application Mistakes
Some delays within the EIDL process are outside your control. However, there are a few mistakes you are able to avoid in order to get through the process more proficiently. Take note of these mistakes and spend some time when signing up to prevent any problems that could delay funding.
Incorrect Information
Double-check that all information is entered accurately. It’s easy to transpose several in your federal EIN, for example, and doing this can delay the processing of the application. Make sure that all information is accurate, and when you’re done, check again.
Missing Information
Not all fields will apply to your business. For example, you might be the sole owner of the company, which means you don’t have to list other owners on your application. However, you must ensure that you complete every field that’s applicable to your business. And don’t forget to include your signature!
Missing Documentation
All required documentation must be submitted with your application for it to be processed. As well as the forms and documents you must submit for yourself, don’t forget to submit all documentation from other owners, general partners, and affiliates.
Failure To Follow Up
While your application has been reviewed, the SBA may need additional information or documentation. Make sure to answer your phone or check your email to make sure you receive these communications so you can respond promptly.
Falling For Scams
Be conscious of potential scams. All emails in the SBA ought to be from their email ending in sba.gov. Emails or telephone calls requesting an upfront payment to trace or expedite the loan are fraudulent and really should be reported towards the SBA. If you’re doubtful as to whether a phone call or email in the SBA is legit, email or call the business using contact info in the official SBA website.
Sending Outdated Information
The financial documents that you send over must be current; that is, they ought to be dated within 3 months of trying to get your loan. You must also submit your most recent federal income tax returns. Sending outdated documentation can delay the processing of the loan.
What Happens Once you Apply
After you apply for that EIDL program, it’s now (mostly) a waiting game. You’ll be assigned financing officer that may request additional information and can offer assistance if needed. Should you requested the Emergency Advance, you can receive your funds within a couple of days after the application continues to be filed successfully. The EIDL itself may take longer to hit your money if you’re approved. Expect to wait a minimum of several weeks to receive funding.
If you applied online, you should use the SBA Smart Assistant to determine the status of the loan. You'll be required to enter your password and email address or username that you accustomed to register. You may also contact the SBA by phone at 1-800-659-2955 (make sure you request Tier 2) or email to inquire about the status or to ask any queries. Be prepared to provide information just like your legal name, business name, and federal EIN. Find out more about checking the status of the EIDL.
If your loan qualifies, congratulations! Should you be denied, there are many other options to understand more about to get the financial relief your company needs.
Other Choices for Small Business Coronavirus Relief
It’s pretty scary out there in the world today, and there are lots of stuff that are beyond our control. However, one thing that small businesses can perform is be proactive in seeking loans and other types of financial relief. Unsure of how to start? Take a look at our COVID-19 hub to explore the financial opportunities available to you. is working night and day to supply the most up-to-date and relevant information to help small businesses like you overcome the economical effects of the coronavirus. Best of luck!
