If the COVID-19 pandemic has negatively impacted your business, the EIDL can help you get your business off the ground. But what exactly is it, and what are its benefits? Here are the fundamentals you need to know about the EIDL before you apply for it.
What is the EIDL?
The Economic Injury Disaster Loan (EIDL) is an SBA disaster loan provided to small businesses or private, non-profit organizations that suffer considerable economic injury due to a natural disaster.
An EIDL can help businesses meet financial obligations that would have been met had the disaster not struck. Small business owners can obtain up to $2 million of financial assistance. However, loan amounts disbursed depend on the extent of economic injury.
Is Your Business Eligible for an EIDL?
Before you consider applying for an EIDL, you need to ascertain whether your business is eligible for a loan. According to the experts at Lantern by SoFi, you’ll generally qualify for an SBA EIDL loan disbursement if you run a small business or private non-profit organization. In addition, you’ll need to meet the following requirements.
Have a maximum of 500 employees
Your business must have fewer than 500 employees. However, some small businesses with more than 500 employees may still be eligible according to the SBA size standards.
Engage in acceptable activities
Your business will be denied an EIDL if it engages in any of the following:
- Any activities of a sexual nature
- Activities deemed unlawful by the federal government
Your business will also be ineligible for an EIDL if it earns more than one-third of its gross income legal gambling proceeds. In addition, you may fail to qualify for a loan if any principal shareholder with a 50% or greater stake in your business defaults on child support payments for more than two months.
Benefits of Getting an EIDL
The EIDL is an excellent choice for small businesses looking to stay afloat after the negative impacts of a disaster. Here are some of its advantages:
Many loan application processes can be quite tedious. The EIDL application process is pretty simple. As long as you have all your financial documents ready, it only takes a few minutes to complete.
The EIDL has a much lower interest rate compared to traditional loans. The interest rate is 3.75% for small businesses and 2.75% for not-for-profit organizations.
Long Term Repayment Options
The EIDL has a 30-year repayment plan, and there is no prepayment fine if you settle early. Additionally, there’s a one-year deferment period after obtaining the loan, although the SBA allows you to start paying it immediately.
How to Apply for the EIDL
You can apply for a loan via the SBA’s Disaster Loan Assistance portal. The application involves a five-step process, and it takes about one hour and forty-five minutes to complete.
If the COVID-19 pandemic has negatively impacted your business and you’re struggling to sustain it, you may want to consider applying for an EIDL. But don’t wait too long. Apply for the loan before the December 31, 2021, deadline.