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SBA Economic Injury Disaster Loan (EIDL)

What is EIDL? 

Businesses across the country were devastated by the Covid-19 pandemic and were in desperate need of working capital to stay afloat. The U.S. government offered a multitude of financial services to help businesses during these challenging times, one of which was an EIDL, or a Covid-19 Economic Injury Disaster Loan.  


EIDL loans, funded by the U.S. Small Business Administration (“SBA”) were intended to help small businesses recover from the hardships of the pandemic. They were intended to be used by small businesses to cover operating expenses and were made appealing to them with accessible and borrower-friendly terms. The EIDL program offered two funding options: loans or advances. 


What is the difference between EIDL loans and advances? 

EIDL loans were low-interest, long-term, fixed-rate loans. The interest rate was 3.75% per annum for businesses, and 2.75% per annum for nonprofits, both with a 30-year term, with payments deferred for the first two years.  


The maximum EIDL loan amount was $2 million, and collateral was required for loans over $25,000, as was a personal guaranty (“PG”) for loans over $200,000. In addition to favorable terms, another benefit of EIDL loans was the relatively attainable requirements. For loans of under $500,000, the credit score requirement was 570. For over $500,000, it was 625. 


Different than traditional small business loans, EIDL advances did not need to be repaid. In this respect, they were like grants. Because of these extremely favorable terms, EIDL advances were far more difficult to qualify for. They were reserved for businesses hit hardest by the pandemic and were for significantly less money than loans. To be eligible for an advance of up to $10,000, applicants had to be in a low-income community, have less than 300 employees and have experienced at least a 30% reduction in revenue during the pandemic. Additional advances of up to $5,000 were available to businesses with 50% revenue reductions with fewer than 10 employees.  


Given the unprecedented degree of difficulty that all U.S. businesses were facing in the early stages of the pandemic, many of them were eager to jump on the opportunity for an EIDL loan or advance. Through April 28, 2022, nearly four million EIDL loans were approved for over a whopping $378 billion! The EIDL advance program was robust as well, with about 600,000 advances funded for over $6 billion, and approximately 450,000 supplemental target advances for over an additional $2 billion. 


EIDL loans can help small business recover from external hardships.

Can I still apply for this loan? What other options are available? 


Unfortunately, the SBA is no longer offering new EIDL loans as of January 1, 2022. The SBA also stopped evaluating increased requests and closed the online portal in May 2022. However, if you already received an EIDL loan and want records of documents, you may contact the SBA directly. So how else can a small business, still recovering from the pandemic and now faced with the problem of high inflation, get funding? The SBA still offers a suite of traditional loan options. These loan options have competitive terms but also drawbacks, such as a slow approval process. Traditional bank loans are also a consideration for many small businesses but can be inaccessible due to the strict credit requirements.  


In contrast, alternative financing offers financing services with less strict requirements. It can also be funded in as little as 24 hours! 


One financing service that can be a great fit for businesses is invoice factoring. With invoice factoring, a company like CapFlow Funding will buy the right to collect your outstanding invoice. They will pay you the value of the invoice upfront at a slight discount. With invoice factoring, you can get working capital without having to wait months before an invoice would typically be paid. Invoice factoring is also less expensive than other types of alternative funding like a merchant cash advance. It will not leave you in debt. The knowledgeable team at CapFlow Funding will work with your company to form an efficient and effective funding plan.

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