Even before the pandemic, the Small Business Administration offered Economic Injury Disaster Loans for “losses not covered by insurance or funding from the Federal Emergency Management Agency (FEMA) for both personal and business” expenses and for “business operating expenses that could have been met had the disaster not occurred.”
The SBA has also been offering a special pandemic EIDL “for working capital” and for “normal operating expenses (i.e. continuation of health care benefits, rent, utilities, and fixed debt payments).” Small business owners and qualified agricultural businesses in all U.S. states and territories are currently eligible to apply. Even if you have a PPP loan, you may still be eligible for the EIDL program.
For loans approved starting the week of April 6, the SBA is offering 24 months of economic injury, with a maximum loan amount of $500,000, for approved loans with the following terms:
- 3.75% for businesses (fixed).
- 2.75% for nonprofits (fixed).
- 30 years.
- No prepayment penalties or fees.
- Unlike the PPP loan, this loan is not forgivable.
Loans approved prior to April 7, 2021, for less than $500,000 are likely eligible for an increase based on new loan maximum amounts announced March 24, 2021. Businesses that received a loan subject to the previous loan limit can submit a request for an increase at this time.
Collateral is required for loans over $25,000. The SBA uses a general security agreement (UCC) designating business assets, such as machinery and equipment, furniture, and fixtures, as collateral.
The SBA has also been offering a Targeted EIDL Advance. This provides businesses in low-income communities with additional funds to ensure small-business continuity, adaptation and resiliency. Advance funds of up to $10,000 will be available to applicants in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to lack of available program funding.
This is not to be confused with the general EIDL Advance, which is no longer available. While active, this program gave advance funds originally calculated based on the number of employees on an applicant’s COVID-19 EIDL application: $1,000 per employee, up to a maximum of $10,000.
As we have been doing with all coronavirus legislation and IRS and SBA guidance during these past several months, we will be sure to update you with any additional insight as soon as possible. Continue to check back here for the most up to date tax information and changes in response to coronavirus. Click here for all of your coronavirus resources. If you have questions about this or related topics contact an MCB Advisor at 703-218-3600 or click here.
Subscribe to the MCB Blog and get all new MCB blog posts sent directly to your inbox.