SBA Disaster Loan FAQ

SBA Economic Injury Disaster Loan FAQ

Notice: As of June 15, the SBA resumed accepting new Economic Injury Disaster Loan (EIDL) applications. As of July 11, the SBA concluded EIDL Advance payments because the $20 billion funding allocation was exhausted.

Check with SBA disaster customer service if you have a question about the status of your loan.

What is an Economic Injury Disaster Loan?

It is a low-interest federal loan issued by the SBA to alleviate economic injury small businesses or private nonprofits are experiencing injury and, in this case, injury caused by the Coronavirus (COVID19). They become available once a county or state gets an Economic Injury Disaster Loan assistance declaration also issued by the SBA.

More information can be found at https://disasterloan.sba.gov/ela/Information/EIDLLoans

How does a small business apply for an EIDL?

The SBA highly recommends using the online loan application, which can be found at https://disasterloan.sba.gov/ela/

How does a business qualify for an EIDL?

Many factors go into qualifying for an EIDL. A primary one is that a small business has to show a loss effective January 31, 2020, to now and/or in the future, as compared to 2019 financials.

What forms are needed for the loan application?

The SBA highly recommends using the online loan application, which can be found at https://disasterloan.sba.gov/ela/.

Small businesses will also need the following:

  • Tax Information Authorization (IRS Form 4506T) for the applicant, principals and affiliates.
  • Complete copies of the most recent Federal Income Tax Return.
  • Schedule of Liabilities (SBA Form 2202).
  • Personal Financial Statement (SBA Form 413).
  • Profit and loss statements.
  • Monthly sales figures (SBA Form 1368).
  • If you are a sole proprietor, you may need to include SBA Form 5C.

For those with limited web/online capabilities, paper forms can be found at https://disasterloan.sba.gov/ela/Information/PaperForms

What forms are needed for nonprofits, churches and associations documentation requirements?

Find SBA guidelines here.

Can economic development organizations classified as 501(c)(6) apply?

Yes, 501(C)(6) can apply for the EIDL.

What can an EIDL be used for?

These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. 

What are all the possible uses of the funds? The wording ‘obligations that are unable to be met due to lack of revenue’ seems to be a catch all, but how much so?

  • The EIDL working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred.  The loans are not intended to replace lost sales or profits or for expansion.
  • The PPP also allows these same type of working capital fixed monthly debts; however, 75% of this loan needs to be used for salary and payroll obligations and only 25% can be spent on other expenses.
  • The PPP and the EIDL cannot be used for the same working capital/monthly expenses. (AKA – No double-dipping.)

What happened to the applications that were dropped into the drop box?

If EIDL applications were completed BEFORE Monday, March 30, they should be resubmitted using the online link. EIDL applications submitted March 30 or later received a verification number upon submission of the application. This verification indicates the application was received. No confirmation email will be sent as a follow-up confirmation of receipt of application.

What are the interest rates for EIDLs?

The interest rate is 3.75% for small businesses and the interest rate for nonprofits is 2.75%. 

When does the business have to start paying back the loan?

EIDLs repayment is deferred for twelve months. Interest accrues during this period. Further, SBA offers loans with long-term repayments to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

What banks are authorized to offer these economic injury disaster loans?

The SBA offers the economic injury disaster loans, not banks. Small businesses should apply for Economic Injury Disaster Loans at https://disasterloan.sba.gov/ela/.

Traditional SBA-backed loans are available as well; to find an SBA-approved lender, visit www.sba.gov/lendermatch.

What is the limit each state can receive? What about each business?

The SBA is available to assist all small businesses across the nation and does not have a total cap on the loan amounts; each qualifying small business can apply for a loan of up to $2M to assist with economic recovery. There is no state or territory limit.

What is the process for and turnaround time from loan application to receiving the funds?

This type of disaster is unprecedented, so no one can predict for sure. However, historically, disaster loans have taken approximately three weeks from time of application until completion of loan officer assessment, submission of any additionally required documentation, and final loan approval. The SBA anticipates the money will be distributed 3 days after that three-week loan officer review and approval period.

Loan process: https://disasterloan.sba.gov/ela/Documents/Three_Step_Process_SBA_Disaster_Loans.pdf

With the social distancing recommendations and closures, how will SBA’s disaster team help small business owners get their loan applications in and processed?

As much as possible, applications and processing is being done online/virtually. SBA’s offices are available to assist borrowers, and SBA’s funded Wisconsin resource partners can also help. Download contact information here.

Since the Federal Reserve lowered its target for the federal funds rate to nearly 0% this week, why is it that the SBA EIDL rate set to 3.75%? Aren’t these direct loans from the SBA? What entity is making the 3.75% interest? Is it possible that the interest rate will be lowered soon?

This level is set by Congress. If Congress acts to adjust it, the SBA will do so per the action. 

How is the disaster loan amount determined?

SBA will look at the last three years historical to determine what the business could have paid if the disaster would not have occurred. The loan funds will not provide for lost sales.

Is the interest rate fixed?

Yes.

Can there be interest only payments on the disaster loan?

There is 12 months of payment deferral automatically built into the disaster loan that begins from the date of the Note, but interest accrues.

What kind of record keeping are owner’s going to be required to do for this loan?

As of April 2, owners will not have to provide documentation of how EIDL funds were spent (unless audited by IRS), but this could change.

Is there a certain time period that the business needs to be in operation?

No, however the business will need the appropriate business and financial documentation required that shows it is a viable business.

Is there a different business size standard for disaster loans than the SBA 7a program?

No, same size standard as the 7a program.

How can I use the loan fund?

The typical timeframe is 21 days for a decision on the application package as long as all information is provided accurately by the applicant. After decisioning, SBA legal prepares the closing documents to send to the borrower. After receipt of the signed documents the funds are direct deposited typically in 3 -5 business days. If collateral is required for the loan SBA will prepare a partial disbursement of $25,000 to submit to the borrower and release the remaining funds once all collateral is appropriately secured.

Is there reconsideration made if the loan is denied?

Yes. An example would be if the loan was turned down for insufficient income and the owner would like to add on a co-borrower, such as a spouse.

What percentage are being denied?

That information is not available yet.

What if an applicant is approved for the loan but withdraws their application. Do they have to re-apply all over again?

The applicant will have up to 6 months to reactivate their loan that was approved.

To meet the credit available elsewhere that is required, does the applicant need to be turned down by a lender?

No. SBA will complete the thorough analysis to determine this based on the information provided by the applicant.

If using a joint tax return and the spouse is not an owner of the business, does the spouse need to sign the 4506?

No.

If the business has insurance that will provide loss proceeds, will this become a problem during application?

No, if insurance proceeds are disbursed to the business after the loan is funded those proceeds would be used to pay down on the disaster loan.

Since the PPP can only cover payroll beginning when the loan is first dispersed, can an EIDL be used to cover payroll in the interim?

Yes. The EIDL working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred.

EIDL Advance ($10K forgivable portion of EIDL):

As of July 11, the SBA concluded EIDL Advance payments because the $20 billion funding allocation was exhausted.

More information: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance

What is the average turn-around time?

This type of disaster is unprecedented, so no one can predict for sure. However, historically, disaster loans have taken approximately three weeks from time of application until completion of loan officer assessment, submission of any additionally required documentation, and final loan approval. The SBA anticipates the money will be distributed 3 days after that three-week loan officer review and approval period.

If a client plans to apply for a PPP can they also apply for the emergency $10K grant?

Yes, people can apply for both. Guidelines are still being written for how the two funding opportunities with work in tandem, but for now we know the PPP and the EIDL ADVANCE (up-to-$10,000 emergency grant that is part of the EIDL) cannot be used for the same working capital/monthly expenses.

If the business has no other employees rather than themselves, can they get the funding for their own salary? Even if a sole prop or LLC?

Yes, either a sole proprietorship or a one-member LLC can apply for EIDL as long as they can provide an allowable documentation of how the one person is “paid.”

Can a business apply for the loan, ask for the the $10K grant, and then not accept the loan?

Yes, a business can decline the EIDL loan.

Do you have to do any record keeping to prove what it was used for?

As of April 2, the answer is no, unless a tax audit is performed. This could change.

If a client gets a $10K emergency grant and uses some of it for payroll can they still request a PPP and how will that affect their PPP application?

Yes, people can apply for both. Guidelines are still being written for how the two funding opportunities with work in tandem, but for now we know the PPP and the EIDL ADVANCE (up-to-$10,000 emergency grant that is part of the EIDL) cannot be used for the same working capital/monthly expenses.

How do owner’s draws factor into this?

Owners can apply for EIDL and PPP and consider their own draw as a “payroll expense” as long as they can provide documentation of that person’s draw.