Business Organizations

Is a COVID-19 Economic Injury Disaster Loan right for your business?

More than a year after the COVID-19 pandemic began, small businesses and nonprofit organizations across the country still seek financial assistance to deal with the economic ripple effects.

The most pressing question being when Paycheck Protection Program (PPP) funds run out, what should you do? One option might be the pandemic-modified Economic Injury Disaster Loan (EIDL) program, now known as the COVID-19 EIDL. But before you decide to apply, it’s wise to read the fine print.

Throughout its history, the SBA’s EIDL program has provided funds to organizations during federally declared disasters. The basic terms included up to $2 million in loans issued directly by the SBA for a term up to 30 years at an interest rate not to exceed 4%. The COVID-19 national emergency increased the popularity of EIDL as a second vehicle — alongside the PPP — to create access to needed capital.

Karen Blacik

Because the pandemic crisis didn’t directly align with the EIDL program structure, the CARES Act and subsequent legislation carved out a separate EIDL program, the COVID-19 EIDL, which waives two requirements of the original EIDL: 1. Personal guarantees of EIDLs up to $200,000, and 2. Borrowers being required to be in business for at least a year (the CARES Act does, however, require that borrowers be in operation on Jan. 31, 2020).