Economic Injury Disaster Loan Program (EIDL) Overview
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Einar Vollset, co-founder of TinySeed, waded through hundreds of pages of U.S. government documents to compile this overview. Einar is not a lawyer and this should not be considered legal advice. Be sure to do your own research to evaluate these programs as they relate to your specific situation.
Last Updated: 31st March 2020
Requirements
US small businesses with no more than 500 employees
Includes sole-proprietors, independent contractors, and other self-employed individuals
SBA must declare your state impacted by a disaster (here is a list - as of this writing all US states are included)
The business must have suffered “substantial economic injury” from COVID-19.
Applicant must be deemed able to repay (aka low personal credit score likely a detriment)
Cannot be a lobbyist, gambling operation, farm, government entity, cannabis business or a business related to “prurient sexual nature”.
How Much Can I borrow?
1-6 months of monthly working capital needs to cover the monthly fixed expenses necessary to continue to operate your business. eg:
Debt payments
Accounts payable
Payroll for employees
Owner salary
Utilities,
Mortgage payments
Rent
Max Loan Amount is $2m
Loan amounts are based on a company’s actual economic injury as determined by the SBA (less any recoveries such as insurance proceeds)
Loan Conditions
3.75% interest rate
Up to 30 year term
Does not require personal guarantees for loans up to $200k, but does require personal guarantees by owners of more than 20% of the business for loans in excess of that amount.
May require collateral for loans in excess of $25k.
Loan Forgiveness
Most of this loan is not forgivable, with the exception of:
$10k EIDL Grant: You can choose to request a $10k advance during the application process. If you are not approved for the loan, this is turned into a grant.
If you are also given a PPP, this $10k will be deducted from any loan forgiveness you are entitled to.
Exclusions
Language seems to suggest that you can apply for both the EIDL (this loan) and the PPP, but cannot use the funds for the same expenses.
How To Apply
NOTE: Do not trust some random website. Talk to your accountant/lawyer before applying.
You can apply directly with the SBA.
Unlike the PPP loan, there is no bank intermediary.
FAQ
If you have any questions not answered here, feel free to email einar@tinyseed.com - and once again this is not legal advice. I am not a lawyer. I am a sole proprietor/own an LLC and pay myself through an owner draw. Do I still qualify for this loan?
Yes.
Can I get both this and the PPP?
Yes, but you are not allowed to use the loan for the same purposes. As the PPP includes a forgiveness opportunity, it’s worth thinking about how to allocate expenses from each of these.
I’ve seen a lot of Twitter noise about “affiliation rules” and that anyone who has taken investment may not qualify. Is that true?
This would likely only apply to situations where you no longer have control over your business (aka you sold so much of it someone else controls it). The intent of that rule is to avoid scenarios where a huge company claims all its wholly owned subsidiaries as “small businesses”.
How long until I see any cash from this?
Up to $10k (the EIDL Grant portion) should be available in 3 days.
Wait so I get to keep the $10k EIDL Grant even if I get denied the loan?
Yes.
When will this program become available? How long can I apply for?
It’s available now.
