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If you’ve heard about the Economic Injury Disaster Loan (EIDL) grant program offered by the U.S. Small Business Association (SBA) for businesses affected by the pandemic, and want to see if you qualify, now is the time. While EIDL is still available — both grants and loans -- time is running out. Here’s the lowdown on what you need to know in late 2021 and 2022 about getting emergency funding for your business.
What is an EIDL Grant?
An EIDL grant, called an “advance” by the SBA, is money awarded to small business owners and independent contractors who have been severely impacted by the COVID-19 pandemic. Unlike EIDL loans, which must be repaid, EIDL grants do not have to be paid back. There are two COVID EIDL grant programs: the Targeted EIDL Advance and the Supplemental Targeted Advance, which together can provide qualified small businesses and freelancers with up to $15,000. The deadline for applying for either advance is December 31, 2021.EIDL Grants vs. EIDL Loans
The SBA also offers low-interest EIDL loans to small businesses and freelancers who have been impacted by the pandemic. These do have to be paid back and there are some restrictions on how you can and can't use EIDL loans. These funds are meant to be used to help cover day-to-day operating expenses; they cannot be used to expand your business or start a new small business.Small businesses and independent contractors that qualify for the program can borrow up to $2 million with loan terms of 3.75% fixed interest over 30 years. The deadline for initial loan applications is December 31, 2021, however, requests for loan increases or reconsideration of a denied application will continue into 2021.Recommended: How to Calculate Your EIDL Loan Amount Here’s a quick look at how EIDL loans compare to EIDL grants.| EIDL Loans | EIDL Grants |
|---|
| Must be repaid | Do not need to be repaid |
| To qualify, businesses need to have suffered working capital losses due to the coronavirus pandemic, have no more than 500 employees, and have a credit score of at least 625. | To qualify, businesses must be located in a low-income community, have no more than 300 employees, and be able to show a certain reduction in revenue due to the pandemic. |
EIDL Grant History
If you’ve read about the EIDL grant program in the past and feel like things have changed since then, you’re probably right. There have been several changes to the program since it began over a year ago.The EIDL grants were initially launched in March of 2020 and provided funds based on the number of employees that a business had. Then, your business could get EIDL $1000 grants for each employee, with a cap of $10,000. An independent contractor or gig worker could also get $1,000. Just like now, the grant program required a loan application.These $1,000 per employee grants reached their funding limit fairly soon after they were offered and are no longer available. This grant has been replaced by the Targeted and Supplemental EIDL advances, which offer potentially larger amounts, but have more restrictions.Status of EIDL Grants in 2021 and 2022
According to a recent announcement by the SBA, applications for EIDL COVID advances will no longer be accepted after December 31, 2021, though they will continue to be processed after that date.EIDL Advance vs Targeted EIDL Advance
There are two versions of the EIDL advance, each with its own requirements to qualify:Targeted Advance
To qualify for the Targeted Advance of up to $10,000, your business must be located in an EIDL low-income community and be able to demonstrate a 30% or greater reduction in revenue over an eight-week period starting March 2, 2020. Your business must also have 300 or fewer employees.Supplemental Targeted Advance
To qualify for the Supplemental Advance of up to $5,000, you must have a business located in a low-income community, be able to show a 50% or greater loss in revenue over that same eight-week period listed above, and have 10 or fewer employees.Here’s a side-by-side comparison.| Targeted Advance | Supplemental Targeted Advance |
|---|
| Provides up to $10,000 | Provides up to $5,000 |
| Must show 30%+ reduction in revenue | Must show 50%+ reduction in revenue |
How to Apply for an EIDL Grant in 2021
To receive an EIDL grant, you must first apply for a COVID-19 EIDL loan. You do not need to accept the loan or be approved for the loan to receive an advance.To start your application, you can go to the online application portal. Once there, you will be provided with step-by-step help and the SBA will contact you if additional information is needed. September 2021 EIDL Loan Changes
The EIDL loan program was originally designed to offer low-interest loans to help businesses located in declared disaster areas, including those impacted by hurricanes, droughts, and floods.During the pandemic, however, the SBA expanded the program to include both loans and grants to businesses and independent contractors negatively impacted by the coronavirus pandemic. Here’s what’s changed for the EIDL loan program as of September 8, 2021.- The maximum amount you can borrow has been increased from $500,000 to $2 million. You can now use those funds for operating expenses, as well as to pay and prepay business loans incurred at any time.
- The deferment period for these loans is now 24 months from origination.
For small businesses that have not yet applied for a COVID EIDL loan, December 31, 2021, is the deadline. However, for those businesses wanting a loan increase or have been denied in the past six months or less and need to file a reconsideration request to appeal a decline, these will continue into 2022. In fact, borrowers can request increases up to their maximum eligible loan amount for up to two years after their loan origination date, or until the funds are exhausted, whichever is sooner.Non-COVID EIDLs will continue. The Takeaway
The SBA EIDL advance can be a great opportunity for businesses that qualify to get a little financial assistance that doesn’t have to be paid back.But if you don’t qualify or miss that December 31, 2021 deadline, there are still numerous small business funding options that entrepreneurs and small business owners can take advantage of. These include other types of grants from the SBA, government grants, and traditional loans.If you’re interested in investigating loan options without making any type of commitment, Lantern by SoFi can help. With our online lending platform, you can explore rates from multiple small business lenders with just one application.
Photo credit: iStock/andresr
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About the Author
Susan Guillory
Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
