What now? A comprehensive guide for small business owners

There is some confusion regarding the Small Business Administration Economic Injury Disaster Loan (EIDL) and the Covid-19 EIDL. Let’s clear it up first.

During the Covid years, as part of the CARES Economic Assistance Act, SBA added the Covid-19 EIDL grant to the EIDL loan program. SBA soon expanded the Covid-19 EIDL grant to include the EIDL Advance and the Covid-19 Shuttered Venue grants.

To further clear up the confusion between the EIDL loan and the Covid-19 Economic Injury Disaster Grant, the Covid Paycheck Protection Program (PPP) loan, the targeted EIDL grant, and the Covid-19 EIDL grant may be forgiven.

Also, although the EIDL program was momentarily reopened, SBA stopped accepting applications for the Covid-19 EIDL program.

Sorry? Unforgiven?

EIDL grants may be forgiven. EIDL loans or any SBA Disaster Loans cannot be forgiven. However, Covid-19 EIDL loans in 2020-22 may have a grace period of up to 30 months from the date of loan disbursement.

Unfortunately, the Covid pandemic is not the only economic disaster that small business owners can face. Economic Injury Disaster Loans are provided to small businesses after declared natural disasters such as floods, hurricanes and, more recently, train accidents that release hazardous materials.

Should I apply for EIDL funds? Have questions about EIDL program screws?

Here’s how the EIDL program works.

eidl loan approved now what?

Understanding the EIDL loan. Economic Injury Disaster Loan

What is an economic loss accident loan? The EIDL program is designed to assist small businesses, sole proprietors, and nonprofit organizations in times of natural disasters or economic injury.

To be eligible, a small business must be located in a declared (by an official organization, such as a state governor or US president) disaster area.

Ironically, in order to qualify for EIDL loans, you must have previously been denied loan applications. That is, you have tried to get a loan from other sources and your current status is not successful.

Once you’ve been denied and have loan documents to prove it, you can apply for EIDL funds (SBA loans) through an EIDL application. Apply for EIDL and simplify your EIDL small business loan application by applying online through an SBA-approved lender.

EIDL loan facts for small business owners

  • One of the eligibility requirements is that the business must meet the SBA small business size guidelines with 500 or fewer employees.
  • The second of the eligibility requirements is that the small business must be located in a declared disaster area. SBA will facilitate an expedited application portal.
  • EIDL loan funds can be used for working capital and other business expenses such as operating expenses. The SBA has specific guidelines on what is included in working capital.
  • The maximum loan amount for EIDL business loans is up to 2 million USD.
  • The interest rate will be no more than 4%, much lower than most business loans.
  • The repayment period can be up to 30 years.
  • EIDL funds can be used to pay existing fixed debt payments from existing business finance loans/long term debt. In other words, you can use the money you borrowed at less than 4% for May payments on existing borrowers’ business loans/fixed debts. This can really help small businesses and non-profits grow.
  • Your EIDL loan application must be made under your business name through an SBA-approved lending bank using the required SBA form. You may be able to apply online.
  • An EIDL loan deadline will be set for each disaster. After that deadline, the application portal will be closed and SBA is no longer accepting EIDL applications from businesses.

After confirmation. basic steps for small business owners

Once you hear from an SBA-approved bank loan officer that your loan status is approved, contact your financial advisor. The funds come from the federal government and there are guidelines for how they can be spent and how EIDL credits affect your tax returns.

Review and understand your loan agreement

Once your SBA EIDL loan status is confirmed, you should carefully review the documentation and any relevant loan terminology.

Before receiving EIDL funds, make sure you understand all the terms and conditions, including the interest rate. You will have eight weeks until your first payment is due.

Personal financial statement. track your finances

Before doing anything with EIDL funds, update your personal financial statement.

A personal financial statement is a document that lists all of your assets, liabilities, and resulting net worth. It can be used by individuals and businesses to assess their financial situation. It can be used by lenders who require personal guarantees for business loans.

A statement usually includes a balance sheet section and an income stream section.

An individual’s net worth is determined by subtracting his liabilities from his assets. An EIDL loan or any loan is a liability that affects a person’s net worth.

Using an EIDL loan


  • Borrowers can use the money for working capital.
  • Borrowers can use the money for additional approved uses, such as paying health benefits, paying rent/mortgage and utilities, accounts payable, or making payments on existing fixed debt.

Do not do it

  • Do not use EIDL funds to pay bonuses or dividends.
  • Do not use the funds to expand business facilities.
  • Do not use the money to repair or replace physical damage to the facility. Those uses must be the result of a claim against your commercial business insurance. This is one of the most common credit mistakes.
  • Borrowers may not use the funds to relocate your business.

Long-term strategies for managing your EIDL loan

Small business owners should carefully weigh decisions about the best long-term strategies for managing an EIDL loan.

Redemption strategies. repay your EIDL loan

The EIDL loan term and payment amount is calculated by the SBA. There is no penalty for paying off an SBA loan early.

Can a small business owner use the EIDL program to consolidate loans (pre-existing debt)? Can a small business owner request a loan extension?

The best answer is that every situation is different. A small business owner’s proposed strategy will be viewed more favorably after the owner has established a record of on-time EIDL loan payments.

Business growth and expansion. use your EIDL loan wisely

Because an EIDL loan has a very attractive interest rate, it may make sense to use the money to pay off a separate, existing, high-interest debt.

However, it would make more sense to use an EIDL loan to help businesses. Whether you are a sole proprietor or a small business owner with multiple employers, contact your financial advisor or tax professional to discuss options.

Emergency planning. prepare for the unexpected

Should businesses pay off their EIDL loan early? Or should they use existing money to fund a contingency plan?

Creating and funding a rainy day contingency plan is another way EIDL loan money can help businesses achieve financial security and stability.

EIDL loan forgiveness?

The EIDL loan must be repaid. An SBA grant can be forgiven with proper documentation.

Tax implications of an EIDL loan

An EIDL loan is treated the same as a conventional loan. Businesses can deduct the amount of interest paid.

Frequently Asked Questions (FAQ)

What are the interest rates and terms of the EIDL loan?

The term can be up to 30 years and the interest rate will not exceed 4%.

Can I use an EIDL loan to pay off existing debts?

Small businesses can use an EIDL to pay off existing business debt.

What if I can’t repay my EIDL loan on time?

If you are unable to pay on time, notify your lender and the SBA immediately.

Are there penalties for early repayment of an EIDL loan?

No. There is no penalty for early repayment of EIDL loan.

How can I request additional funds or increase my EIDL loan amount?

If you have established a history of making timely payments over a period of time, you can request an EIDL loan increase. Most likely, the increase will not be provided for an amount higher than the original loan.

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