The SBA has made Economic Injury Disaster Loans or “EID Loans” available for qualifying businesses that have been economically injured due to the epidemic.
Being Eligible for the SBA EID Loan
A business must first be in a known area that is a declared disaster area recognized by the SBA. All recognized Declared Disaster Areas are listed on the SBA’s website. The following areas are approved for disaster loan assistance due to the Coronavirus: California, Connecticut, Idaho, Maine, Massachusetts, New Hampshire, New York, Oregon, Rhode Island, and Washington. Many other states are still submitting requests to the SBA for an economic injury disaster declaration and should be eligible for EID loans in the coming days and weeks.
The SBA requires that businesses qualify as a small business to be eligible for an EID Loan. A “small business” varies, however is generally based on the number of employees or the amount of revenue a business annually makes. The SBA has a website to help businesses determine if they qualify as a “small business”.
Finally, a business must show that it has suffered “substantial economic injury” as a direct result of the disaster. A “substantial economic injury” generally means a decrease of income to the point where the business is unable to meet its obligations and pay ordinary and necessary operating expenses.
EID Loan Application
In addition to the EID Loan application form, an applicant will also need to submit the following documentation to the SBA –
- Tax Information (IRS Form 4506T), completed and signed by each principal which own 20% or more of applicant business, general partner, general manager or owner who has 50% ownership interest in affiliate business.
- Completed copies, including all schedules, of the most recent Federal income tax returns for the applicant business; if not available, a written explanation must be submitted instead
- Personal Financial Statement (SBA Form 413) must be completed, signed, and dated by the applicant and each principal, general partner or managing member.
- A schedule of Liabilities listing all fixed debts (SBA Form 2202)
Once submission of the loan application is completed, the SBA will conduct a credit check of the applicant and verify the business’s financial information. The SBA may request additional financial information. It is likely that the application and review process will take longer than the usual 2-3 weeks due to high volume from Coronavirus. Once an application is approved, the applicant will need to sign the EID Loan documents and return them to the SBA. The applicant can then expect to receive a disbursement of the EID Loan funds within one week from the SBA’s receipt.
EID General Terms
The funds from an EID loan can be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The terms of an EID Loan will be determined by the SBA on a case-by-case basis, based on each applicant’s needs and ability to repay. On average, the most amount of an EID loan for the Coronavirus disaster is $2 million with an interest rate of 3.75% for small businesses or 2.75% for non-profits. The most repayment term of an EID loan is 30 years. There are no pre-payment penalties by the SBA on an EID loan.
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Author Bio: Michael Hollis is a Detroit native who now lives in Los Angeles. He is an account executive who has helped hundreds of business owners Corona relief loans solutions. He’s experimented with various occupations: computer programming, dog-training, scientificating… But his favorite job is the one he’s now doing full time — providing business funding for hard working business owners across the country.