Small businesses, particularly agricultural firms and nonprofit groups, can qualify for an Economic injury disaster loan in reaction to the coronavirus epidemic.
The EIDL programs are run by the Small Business Administration in the United States (SBA). It is intended to provide financial assistance to enterprises experiencing a temporary loss of revenue due to Covid-19.
An EIDL can assist you in meeting financial responsibilities that your company, private organization, or non-profit organization would have been able to pay. Here’s everything you need to know about coronavirus disaster loans.
What is a disaster relief loan?
The Small Business Administration (SBA) has a catastrophe financing program to help businesses recover from natural disasters. After a disaster, the programs are often used to support enterprises to get back on their feet by providing low-interest loans.
This service has been available to small businesses across the country since early March 2019. This offer is for those who have suffered considerable losses as a result of the coronavirus epidemic. The interest rate on these loans is 3.75 percent for small enterprises and 2.75 percent for NGOs. Furthermore, the company’s value is usually limited to $2 million.
- Agricultural Enterprises
- Religious Organizations
- Cannabis Industry
- Casinos & Racetracks
- Gambling Concerns
Eligible Criteria to Apply
EIDL-related applicants must be located in the designated area physically and have continuous losses of working capital. These losses should be as a result of the coronavirus pandemic, according to the SBA. Applicants that are eligible include:
- Small businesses are those with 500 or fewer employees, as defined by the SBA’s Size Standards.
- Cooperatives with fewer than 500 employees
- Agricultural businesses with fewer than 500 employees
- The majority of private NGOs
- Organizations with a religious mission
- Independent contractors and sole proprietorships
Amount You Can Borrow
- Up to $2 million in prize money
- Employees will receive $1,000 in advance with no obligation to repay (up to $10,000).
- Small enterprises can borrow at a rate of 3.75 percent, while charitable organizations can borrow at 2.75 percent.
- 30-year terms are possible.
- The size and type of business and its financial resources determine eligibility for these working capital loans.
- Without collateral, up to $25,000 is available.
What paperwork do you need to plan?
Now we get real. You’ll need at the very least:
- Personal Financial Statement (Form 5) of the Small Business Administration (SBA Form 413)
- Income Statement for the Year 2020
- Returns from three years of company and personal taxes (IRS Form 4506T)
- Statement of personal finances
- Schedule of Business Debts
- Balance Sheet for the Year 2020
In general, be prepared to display last year’s month-by-month financials, then predict future months to highlight any disparities. However, if your company was not profitable the previous year, you won’t have a good chance of getting a loan.
Application Process For the EIDL Loan
To apply for a loan, visit the SBA’s COVID-19 EIDL Application page and fill out the form carefully. Then, you can contact the SBA’s Customer Service Center at 1-800-659-2955 for assistance or check the progress of your application.
You can also apply for the loan if you have already obtained a paycheck protection loan. However, proceeds from both loans cannot be utilized for the same reason. Moreover, a Covid-19 EIDL can only be applied once to every business.
Fast Facts about the Covid-19 EIDL
If you’re looking for a loan worth more than $25,000, you’ll need to put up some money as security. This is because the SBA employs a general security agreement (UCC) to designate business assets such as machinery and equipment as collateral.
EIDL loans are non-forgivable and have a 30-year maturity period. Payments are deferred for one year; however, borrowers can make payments if they so desire. Interest will continue to accumulate.
The following are the terms of EIDL’s loan:
- 75 percent for companies (fixed)
- Thirty years
- 75 percent for charitable organizations (fixed)
- There are no fees or penalties for paying in advance.
The Bottom line
Many business obligations, such as payroll, accounts payable, equipment and machinery purchases, etc., can’t be paid due to COVID-19 by companies. However, these all can be covered by disaster loans.