EIDL Loan Requirements: What Are They?

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What’s the Difference Between the EIDL Grant vs. the EIDL Loan?
Does Your Business Qualify for an EIDL Loan?
Businesses With 500 or Fewer Employees
Business (or agricultural enterprise) Sole proprietor, with or without employees, or an independent contractor Cooperative Employee Stock Ownership Plan (ESOP) Tribal small business concern Certain private nonprofit organizations that are nongovernmental
Businesses With 500+ Employees
Geographical Locations
Additional EIDL Requirements
Be engaged in illegal activities as defined in federal guidelines Have someone with a 50% or greater ownership who is more than 60 days delinquent on child support payments “present live performances of a prurient sexual nature” or receive more than a minimal amount of revenue through products/services/depictions/displays of such Receive more than one third of gross annual revenue from legal gambling Be in the lobbying industry Be a state, local, or municipal government entity, or a member of Congress
EIDL Loan Terms
Maximum Amounts and Loan Length
Interest Rates
3.75% for businesses (fixed) 2.75% for nonprofits (fixed)
Fees
Acceptable Uses of EIDL Loans
Continuation of health care benefits Rent Utilities Fixed debt payments
Collateral Requirements
Calculating Loan Amounts
Other Frequently Asked EIDL Questions
Pros and Cons of EIDL Loans
Benefits of EIDL Loans
Easy Application Process: You can apply online, which can streamline the process. There’s no need to make an appointment or travel to a financial institution to apply. Flexible Loan Amounts: If your application is approved, the SBA will let your business know how much you qualify for. Then you can borrow up to that amount. So, if you get approved for $125,000 but need only $100,000, you can borrow that amount. Low Interest Rates: They’re currently 3.75%, fixed, for small businesses and 2.75%, fixed, for non-profit agencies. Long Terms: The term is 30 years. Flexibility About When Payments Start: There is a year of deferment (or two years for COVID-19 EIDL loans), which means your business can wait a year (or two years) to start making payments, if you wish. No Fees or Prepayment Penalties: If you want to start making your payments right away, you can, without penalty.
Disadvantages of EIDL Loans
Not Forgivable: Unlike the PPP loans and the EIDL grant/Advances, these loans are not forgivable and will need to be paid back in full. Limited Uses. Funds can only be used for specific purposes, such as the “continuation of health care benefits, rent, utilities, fixed debt payments.” COVID-19 EIDL loans may also be used for prepaying commercial debt or paying federal business debt. Credit Scores Matter. Credit scores will be considered and factored into the decision-making process, which could present challenges to some businesses.
Summary of EIDL Loan Pros and Cons
The Takeaway
Frequently Asked Questions
Photo credit: iStock/andresr
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About the Author
Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.
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