What Is an EIDL Loan?

The COVID-19 Economic Injury Disaster Loan program was created to help small businesses and nonprofits survive the pandemic via a capital infusion with borrower-friendly terms.

Written by Hilary Collins / August 19, 2022

Quick Bites

  • Economic Injury Disaster Loans were a program from the U.S. Small Business Administration meant to help small businesses and nonprofits survive the COVID-19 pandemic.
  • The SBA stopped accepting applications for EIDL loans on Jan. 1, 2022.
  • The EIDL program approved almost $390 billion in loans for organizations hit hard by the pandemic’s economic effects.

Since 2020, we’ve all learned a lot of acronyms—COVID, PPE, EIP—but here’s one you might not have heard of yet: EIDL. The EIDL program was just one of a slate of federal programs that popped up after the pandemic as the U.S. government raced to help citizens and businesses navigate a dark and frightening time.

While the long-term legacy of the EIDL program has yet to be seen, it certainly seems that for many small business owners and nonprofit organization managers, it served as an essential lifeline when times were incredibly tough. “As a specialty foodservice distributor, my company…lost 85% of our business when the country shut down as a response to the pandemic,” Lois Gamerman, an EIDL recipient and president and CEO of Soft Stuff Distributors, Inc., in Jessup, Md, told the SBA. “We furloughed a majority of our 48 employees. With COVID EIDL, we were able to put staff back on payroll, pay down debt and expand.”

Not only that, but many businesses have emerged from the pandemic and are doing better than ever. “We now have 52 employees and are on pace to exceed pre-pandemic revenues by 46%,” Gamerman notes.

Let’s take a deeper look at the EIDL program and how it worked.

Inside this article

  1. What is an EIDL loan?
  2. How does an EIDL loan work?
  3. Who could get an EIDL loan?
  4. Are EIDL loans forgivable?
  5. Example of an EIDL loan
  6. Frequently asked questions

What is an EIDL loan?

A COVID-19 Economic Injury Disaster Loan (EIDL) was a business loan from a federal program managed by the U.S. Small Business Administration (SBA). This program was created to support small businesses’ and nonprofit organizations’ recovery from the pandemic’s economic impacts and help them stay afloat.[1]

The loan funds were for business owners and organization runners to put towards working capital and business expenses like rent, utilities, fixed debt payments and health care. When the program shuttered, it had distributed almost $390 billion to 4 million businesses.[2]

How does an EIDL loan work?

To get an EIDL loan, applicants submitted applications directly to the SBA. If they met eligibility requirements, the SBA offered their small business or nonprofit a loan at a low, fixed interest rate and deferred payments for two years.

Initially, the maximum amount for a loan was $500,000, but that was raised to $2 million. The terms of an EIDL loan were:

  • A 30-year loan term

  • An interest rate of 3.75% for businesses and 2.75% for nonprofits

  • No fees for loans of $25,000 or less

  • A one-time $100 fee for loans over $25,000 when a lien was filed on the borrower’s business assets, plus any costs related to filing that lien

  • A one-time $100 fee for loans over $500,000 where real estate was pledged as collateral including any costs related to filing that lien

Who could get an EIDL loan?

EIDL loans were available to small business owners, agricultural business owners and nonprofit organizations located in the U.S. or its territories. The program was meant for businesses that were suffering substantial economic injury, which the SBA defined as the business being unable to meet its obligations or pay its normal and necessary operating expenses.[3]

To get a loan of $500,000 or less, you had to have a credit score of at least 570. To get a larger loan, the credit score requirement was 625. If you wanted a loan of more than $25,000, you would have to put up collateral. And if you wanted a loan of more than $200,000, you had to give a personal guarantee.

Are EIDL loans forgivable?

No, EIDL loans are not forgivable. Unlike PPP loans, these loans are intended to be repaid in full.[4]

However, the SBA did offer two programs that forgave part of EIDL loans for the businesses and nonprofits that were hit hardest by the pandemic, called the Targeted EIDL Advance and the Supplemental Targeted Advance.

  • The Targeted EIDL Advance was only available to borrowers located in a low-income community whose business had seen a 30% reduction in revenue and had 300 or fewer employees.[5] These borrowers could receive up to $15,000 in funding they didn’t need to repay.

  • An additional $5,000 that didn’t have to be repaid was available through the Supplemental Targeted Advance program. To qualify, borrowers had to be located in a low-income community, to have seen a 50% economic loss, and have 10 or fewer employees.

Example of an EIDL loan

Here’s an example of what an EIDL loan might look like. Imagine the owner of a small florist business with 10 employees. Once COVID hit, her orders tanked—it seemed like no one was splurging on impractical things like flowers. Her revenue bottomed out while she still had to pay to rent the space for her florist shop, pay her employees and continue to have flowers on hand for the trickle of orders that were still coming in.

When SBA launched the EIDL program, she submitted an application for a loan of $500,000. She hoped that money would keep her afloat until the pandemic subsided and life—and flower orders—went back to normal. She definitely qualified as a small business owner who was really struggling to make ends meet due to the pandemic. She also had a good credit score and met that eligibility requirement as well.

Because the amount was over $200,000, she had to sign a personal guarantee. And because the amount was over $25,000, she had to put up collateral. The personal guarantee meant that even if her business went under, the business wasn’t responsible for the loan—she was, and she still had to pay it back. As far as collateral, she had to sign a lien called a UCC-1, which meant her business assets, such as the business’ bank account, florist equipment and any inventory could be seized if she didn’t repay the loan. She paid $100 to file the lien.

But once all the paperwork was taken care of, she got her money. She was able to continue paying for her insurance costs, employees’ salaries, rent for the shop and other expenses. While the 3.75% interest rate was already allowing interest to accrue onto her owed balance, she didn’t have to make any payments for two years, giving her some breathing room to try some new business and marketing ideas and start some new revenue streams. Once those two years were up, payments kicked in, but as vaccines went out and the economy recovered, her orders picked back up and business revenue began to get back to normal.

According to a press release from the administrator of the SBA, Isabella Casillas Guzman, this is exactly what the program was intended to do. She noted that almost 90% of EIDL loans went to businesses with 10 employees or less, keeping the world of U.S. small businesses vibrant and alive.

Frequently asked questions

Are EIDL loans still available?

No. The EIDL program stopped accepting applications on Jan. 1, 2022.

How do they calculate the EIDL loan amount?

The SBA provided simple calculations that limited the amount you were able to borrow based on what kind of business or organization you had, when that business or organization opened and your business’s or nonprofit’s expenses and income.

Are there other ways to get small business loan funding?

Sure! You can tap into your own financial resources by borrowing from your 401(k) or IRA or using your savings. You can also reach out to venture capitalists, crowdfund your business or get a traditional loan from a bank, credit union or online lender. The SBA also offers SBA-guaranteed loans for those who are struggling to get a traditional business loan.

Article Sources
  1. “About COVID-19 EIDL,” U.S. Small Business Administration. https://www.sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan/about-covid-19-eidl.
  2. “Four Million Hard-Hit Businesses Approved for Nearly $390 Billion in COVID Economic Injury Disaster Loans,” June 13, 2022, U.S. Small Business Administration. https://www.sba.gov/article/2022/jun/13/four-million-hard-hit-businesses-approved-nearly-390-billion-covid-economic-injury-disaster-loans.
  3. “Economic Injury Disaster Loans,” U.S. Small Business Administration. https://www.sba.gov/funding-programs/disaster-assistance/economic-injury-disaster-loans.
  4. “Frequently Asked Questions, COVID-19 Economic Injury Disaster Loan (EIDL),” Nov. 23, 2020, U.S. Small Business Administration. https://www.sba.gov/sites/default/files/2020-11/COVID%20EIDL%20FAQ%20rev%20112320-508.pdf.
  5. “About Targeted EIDL Advance and Supplemental Targeted Advance,” U.S. Small Business Administration. https://www.sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan/about-targeted-eidl-advance-supplemental-targeted-advance.

About the Author

Hilary Collins

Hilary Collins

Hilary is an experienced finance writer with a passion for turning complicated topics into readable stories with real-world takeaways.

Full bio

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