With the disastrous outcomes of the Covid-19 pandemic on various financial sectors, the federal government is taking action to lift taxpayers’ burden. While many programs rolled out to help businesses through the pandemic, the Economic Injury Disaster Loan program (EIDL) is not a new buzzword. The EIDL is an already existing program regulated by the Small Business Administration.
(SBA), gaining impetus through the Coronavirus Aid, Relief and Security Relief (CARES Act). This economic aid program supports independent contractors, small scale suppliers and assignment workers by making them eligible to receive a $1000 assistance, which does not have to be repaid to the government. Small businesses and agricultural businesses also qualify to apply for the monetary aid – $1000 per employee of the business at most to $10,000. This disaster assistance loan comes under the category of EIDL Advance loan, which ended in July 2020. The government levies an interest rate of 3.75% for businesses and a fixed 2.75% on non-profit organizations. The borrowers are granted 30 years to repay their loaning amount with no prepayment penalties or fees.
To apply for an EIDL, you need to fill out an SBA form requesting an Economic Injury Disaster Recovery Loan, ensuring you get an advance even if you do not receive the grant. Initially, the federal government had planned to allocate $10 billion for these monetary grants. The SBA ceased accepting requests and new applications in mid-April 2020 due to a lapse in the system. However, the suspension was lifted, and another $60 billion for EIDL and aid after that.
What can Economic injury disaster loans (EIDL) be used for?
This disaster loan assistance can be used for :
- a) Working capital to continue operations
- b) Essential expenditures to reduce specific economic injury suffered from a loss
- c) Maintaining payroll
- d) Increased supply expenditures
- e) Mortgage or rent payments
- f) Repaying debt that cannot be repaid due to revenue losses.
Eligibility criteria for the loan
The EIDL is regulated by the federal government rather than private money lenders and does not possess an intricate banking industry network. While EIDL loans are similar to Paycheck Protection Program (PPP) loans, PPP can be waived off, partially or completely, if a specific criterion is fulfilled, the EIDL loans have to be repaid. These low-interest loans intend to give monetary aid to businesses that qualify. Since the coronavirus pandemic set ablaze, the federal government has adjusted eligibility guidelines to better serve those left vulnerable by the pandemic. Similar to a PPP loan, EIDL funds for industries struggling to make their economic ends meet. An EIDL loan can be used to provide coverage on payroll and inventory, pay a debt or cover other business expenses.
To be eligible for financial assistance under the EIDL, an individual must fulfil the following criteria:
- There should be no drastic activities in the applicant’s financial status since the date of the application for the loan. Extremities include tax liens, bankruptcy, arrest on felony, etc.
- The applicant must certify that no fee has been paid for services rendered in connection with this aid except those reported on the loan application.
- No application for other compensations for disaster losses has been requested, and no other compensation has been received other than those disclosed by the borrower to the SBA.
If an individual is acquitted of wrongfully applying for the EIDL loan, he or she could be subject to civil or criminal penalties. You must add your social security number in the application if you are applying as an individual independent applicant.