What is an Economic Disaster Loan?
What is an Economic Disaster Loan? It’s a question small businesses are asking due to the COVID-19 pandemic. We will provide an overview of an EIDL loan and highlight some of the benefits it offers. If you’re considering applying for it, keep reading. We’ll discuss who’s eligible, what it can be used for, and more. Let’s start!
What is an Economic Disaster Loan (EIDL)?
EIDL assistance is available in the form of an Economic Disaster Loan (EIDL) and an EIDL Advance. EIDLs are working capital loans that can provide up to $2 million to small businesses and nonprofit organizations to help mitigate the financial impacts of a disaster.
The EIDL program is primarily designed to help businesses recover from the short-term effects of a disaster, such as significant economic damage or property damage. EIDLs are administered by the Small Business Administration (SBA) and are subject to credit approval.
How does an EIDL loan work?
The disaster relief loan amount is based on the applicant’s financial obligations, which include accounts payable, inventory, and other debts that cannot be paid as a result of the disaster. Terms are based on the applicant’s ability to repay the disaster loan.
An EIDL loan has several advantages, including a lower interest rate than many other types of loans, no collateral is required, and the loan can be repaid over a longer period than many other types of loans.
Who is eligible?
Declared disaster relief is available to small businesses, small agricultural cooperatives, small aquaculture businesses and most private non-profit organizations located in a disaster area.
To qualify for an economic disaster loan, the business must have suffered significant economic harm as a result of the disaster, be located in a declared disaster area, have a credit history indicating that the business is reasonably likely to repay the loan and be unable to obtain credit elsewhere.
What can it be used for?
An EIDL loan can be used for a variety of purposes, including payroll support, sick or family leave, mortgage or lease payments, and utility payments. The loan amount you receive is based on your estimated economic hardship and financial need, which will be determined by the Small Business Administration (SBA).
What can’t it be used for?
EIDL loans cannot be used for certain purposes, such as refinancing long-term debt or expanding your business. Additionally, EIDL loans cannot be used to pay dividends or salaries to business owners, partners, or shareholders.
How to get an EIDL loan
To obtain an EIDL loan, you must first contact the Small Business Administration (SBA) to determine eligibility and apply for a loan. Next, you will complete the application, which will include information about your business and its financial needs. After that, a loan officer will review your application and determine the loan amount you qualify for. Once approved, you will receive the loan in a lump sum.
READ MORE: Small Business Loan Requirements
The best economic disaster loans for small businesses in 2022
If your business is struggling during these difficult economic times, you are not alone. Fortunately, EIDLs are available to help businesses get back on their feet. Here are the best loans for small businesses in 2022.
1. EIDL Small Business Administration
The SBA EIDL is a government-guaranteed loan that provides long-term, low-interest financing to small businesses and non-profit organizations that have been affected by a declared disaster.
2. Fast Funding
To be eligible for a small business EIDL loan from Rapid Finance, you must also have a minimum credit score of 550, your business must be in operation for 2 years or more, and have a monthly income of at least $10,000.
You must be in business for at least one year and have a minimum monthly income of $3,000 to qualify for an EIDL small business loan. Kabbage also requires a minimum credit score of 640.
Lendio is a small business lender that offers EIDL loans to businesses that have been in business for at least six months, have a minimum monthly income of $4,000 and a minimum credit score of 580.
5. On the bridge
To qualify for a small business EIDL loan from OnDeck, your business must have been in operation for at least one year and have a minimum monthly income of $8.5,000. Your credit score must also be at least 600.
6. Will found
To qualify for a small business EIDL loan with Fundera, your business must have been in operation for at least one year and have a monthly income of at least $16,000. Your credit score must also be at least 620.
To qualify for an EIDL small business loan, your business must have been in operation for at least six months and have a monthly income of at least $8,000. You must also have a minimum credit score of 500.
How much can I borrow with an EIDL loan and what are the interest rates/terms/conditions attached to it etc. ?
The Small Business Administration (SBA) provides disaster relief in the form of Economic Disaster Loans (EIDLs) to small businesses affected by disasters. The SBA can provide up to $500,000 with an interest rate not exceeding 4% and terms up to 30 years. There are no penalties or prepayment charges.
How long do I have to pay off my EIDL loan and what repayment options do I have if I can’t pay the monthly installments etc. ?
EIDL loans cannot be forgiven. The good news is that the first payment due date has been extended from 12 months to 24 months from the date of the note. There is also a deferral period during which full or partial payments can be made (but are not required). It can be deferred up to 30 months from the date of the note. However, interest will continue to accrue during the deferral period.
What is the maximum loan amount that can be borrowed through an EIDL loan from the Small Business Administration?
The maximum loan amount for an SBA EIDL is $500,000. However, businesses can benefit from an EIDL and a physical disaster loan. If the business qualifies for both, the business owner would receive up to $2 million in assistance.
How long does the EIDL loan take to process?
After applying for an EIDL loan, a decision will be made on your application usually within 21 days. If your application is approved, you may receive your payment within five business days.
Can I still apply for COVID-19 EIDL assistance?
Unfortunately, as of January 1, 2022, the SBA is no longer accepting new applications for EIDL COVID-19 loans, requests for increases, or reconsiderations. The EIDL Targeted Advance and the Additional Targeted Advance are also closed.
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