EIDL Loans

What is an EIDL Loan?

An Economic Injury Disaster Loan is a small business loan program used as a form of federal assistance for the repair or rebuilding of non-farm, private sector disaster losses. It exists under the umbrella of Disaster Loan Assistance programs, federally backed to help businesses, private non-profits, homeowners, and renters affected by unforeseen disasters.

To qualify, your business will have to be affected by and located within a declared disaster area. You can check disaster declarations to locate disaster areas by state and territory.

Types of Disaster Loan Assistance Programs:

There are several different types of Disaster Loan Assistance loans available to help small or medium-sized businesses when they have been affected by a disaster or unforeseen circumstance.

Please note, these types of loan also qualifies for homeowners and renters affected by disasters, but for the sake of focusing on business owners, we will be discussing relevant loans for small and medium-sized businesses.

Different types of EIDL Loan Assistance Programs can include:

• Business Physical Disaster Loans: A business of any size that is located in a declared disaster area and has incurred damage during the disaster, may apply for a loan to help replace the damaged property or restore its pre-disaster condition. This specific loan covers disaster losses not fully covered by insurance.
• Economic Injury Disaster Loan (EIDL loan): Substantial economic injury means the business is unable to meet its obligations and pay its ordinary and necessary operating expenses. EIDL provides businesses the necessary working capital to survive until normal operations resume after a disaster.
• Military Reservists Economic Injury Disaster Loan (MREIDL): The purpose of MREIDL loans is not to cover lost income or lost profits. It provides funds to help eligible small businesses meet its ordinary and necessary operating expenses that it could have met, but is unable to because an essential employee was called to active duty in their role as a military reservist.
• COVID-19 Economic Injury Disaster Loan (EIDL): If your small business with 500 or fewer employees has suffered substantial economic injury as a result of the COVID-19 pandemic, you can apply for COVID-19 EIDL. The Coronavirus Aid, Relief, and Economic Security (CARES) Act expanded the SBA's long-standing EIDL program to assist small businesses as we battle the adverse economic effects of the deadly virus.
• The U.S. Small Business Administration announced: the deadline to apply for the Economic Injury Disaster Loan (EIDL) program for the COVID-19 pandemic disaster declaration is extended to Dec. 31, 2021, pending the availability of funds.

Who should apply for an SBA EIDL Loan?

If your business has recently been put at risk due to circumstances such as earthquakes, floods, hurricanes, and other rare events - emergency business funding may be the ideal loan for you.

EIDL loan assistance is available to small businesses when SBA determines they are unable to obtain credit elsewhere. If your business suffered a substantial economic injury and are one of the following types of businesses located in a declared disaster area, you may qualify for this program:

• Small Business
• Small agricultural cooperative
• Most private nonprofit organizations

SBA Disaster Loan Requirements

There are four main considerations for an SBA disaster loan - location, credit score, repayment ability, and available collateral.

• Location: To qualify for an SBA disaster loan, your business must be located within a declared disaster zone. Check the SBA website to determine if you fall within a qualified area.
• Credit Score: According to Fundera, the SBA loan minimum credit requirements fall around 620-640. If your score does not meet the minimum, the SBA will consider other factors such as income, utilities, insurance, and other payments to qualify for the SBA disaster loan or other business loan options.
• Repayment ability: If you have received an EIDL grant through the CARES Act or Coroniavirus Relief Bill, you are not required to repay the funds. However, if you received an EIDL loan, repayment is required. The repayment term will be determined by your ability to repay and will not exceed 30 years.
• Collateral: If you need an SBA disaster loan larger than $25,000, lenders will insist on some form of collateral to complete the loan process. Collateral is any property or asset of value that a lender can use to balance the weight of a loan if there is a substantial risk.

Your business must also refrain from the following activities to qualify:

• Any illegal activity as defined by the federal government
• Any activities of a prurient sexual nature
• Lobbying
• Earning more than one-third of its gross income from legal gambling activities.

Advantages of EIDL Loans:

We understand the sense of urgency required when it comes to acquiring the necessary funds to keep your business afloat in difficult times. Luckily, there are some distinct advantages you should take into account when deciding to pursue this type of loan.

1. Low-Interest Rate: The current interest rate on an EIDL is 3.75% APR for small businesses and a 2.75% interest rate for nonprofit organizations.
2. Quick Processing: The EIDL loan application process adheres to the fact that many businesses need funds as soon as possible. Once approved, some businesses have reported receiving their funds within 5 to 10 business days.
3. Flexible, Long-Term Repayment Options: The EIDL loan has a 30-year repayment plan with no prepayment penalty.
4. Covers Working Capital: Businesses can use these funds to cover normal operating expenses such as payroll, health care benefits, rent, utilities, fixed debt payments, repairs, and replacing inventory if needed.

Restrictions

EIDL loans cannot be used for the following purposes:

• Refinancing new debt
• Buying new capital assets such as new construction or vehicles
• Dividends and bonuses
• Disbursement to owners (unless for the performance of services)

Choose First Union Lending As Your Premier Lender

At First Union Lending, we have an unwavering belief that small and medium-sized businesses deserve the right to access the capital they need to succeed.

Our goal is to build long-term, lasting relationships by providing business owners with what they need when they need it. We pride ourselves on being educated, knowledgeable, and caring when it comes to how we conduct business. We have voluntarily acquired much of the same licensing required by traditional banks to cement our fiduciary responsibility to our clients and our work culture.

We are here to consult, help you save, and guide you and your business to success.