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Are EIDL Loans Forgivable? Rules and Guidelines

Are EIDL Loans Forgivable? Rules and Guidelines; Will economic injury disaster loans (EIDL) be forgiven? Learn more from Lantern by SoFi.
Susan Guillory
Susan GuilloryUpdated September 13, 2021
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Note: The Small Business Administration (SBA) is no longer accepting new applications for COVID-19 Economic Injury Disaster Loans, reconsidering denied requests, or increasing requests. The SBA is offering a Hardship Accommodation Plan for EIDL borrowers experiencing short-term financial challenges. Borrowers eligible for this plan may make reduced payments for six months.If you were one of the thousands of small business owners who received an Economic Injury Disaster Loan (EIDL) because of the COVID-19 pandemic, you may have heard some rumors that are making you wonder whether SBA EIDL loans are forgivable.The short answer is that EIDL loans themselves are generally not forgivable, but there are two Supplemental Advances that may be. Here’s a breakdown of what you need to know about EIDL loan forgiveness by funding type.

What Loans Are Available?

Let’s start off by looking at the two loan programs the Small Business Administration provided to business owners during 2020 and 2021 to help you understand EIDL vs PPP loans.The Paycheck Protection Program (PPP) provided loans to business owners to keep employees working when businesses either experienced slowed sales or had to shut down entirely. That program ended May 31, 2021.The other loan program, Economic Injury Disaster Loan (EIDL), is also complete. The EIDL program provided economic relief to small businesses that have suffered a loss in revenue because of the coronavirus pandemic. There are specific rules about how you can use your EIDL loan. Approved uses included payroll, healthcare benefits, rent, utilities, and other expenses related to running your company.EIDL loans were available in amounts up to $2 million, with interest rates of a fixed 3.75% for 30 years. Collateral is required for loans over $25,000.Now, let’s go back to the question of whether EIDL loans are forgivable.

Which Loans Are Forgivable? 

Both of these two emergency loan programs, the EIDL and the PPP, may be forgivable in part. That means that you don’t have to pay them back as long as you meet certain requirements. But there are strict rules about what kinds of loan are eligible for forgiveness and what you have to do to qualify.
Loan TypePermitted Use of FundsHow to Get Loan Forgiven
EIDLWorking capital and normal operating expenses like: healthcare benefits, rent, utilities, fixed debt payments. Targeted EIDL Advance (up to $10k forgiven): In low-income community Had more than 30% reduction in revenue because of COVID-19 Have 300 or fewer employees Supplemental Targeted Advance (up to $5,000 additional forgiven): In low-income community Had more than 50% reduction in revenue because of COVID-19 Have 10 or fewer employees

EIDL Loan Forgiveness Rules

As you can see from the chart above, there are two opportunities business owners have to get all or part of their EIDL debts forgiven: the Targeted EIDL Advance and the Supplemental Targeted Advance. Let’s go over the EIDL loan forgiveness rules for both.

Targeted EIDL Advance

To be forgiven for the loan, your business must do the following. 
  • Be in a low-income community
  • Have had more than 30% reduction in revenue because of COVID-19
  • Have 300 or fewer employees 
Low-income communities were among the hardest hit during the pandemic, and the SBA wants to ensure that businesses in these areas keep operating. If you’re not sure if you are part of what’s designated as a low-income community, you can use this mapping tool to find out.You must be able to demonstrate that you experienced at least a 30% reduction in revenue over an eight-week period starting March 2, 2020, or later. You will be asked to provide gross monthly revenue, including all profits and salaries.

Supplemental Targeted Advance

To qualify for forgiveness here your business must do the following.
  • Be in a low-income community
  • Had experienced more than a 50% reduction in revenue because of COVID-19
  • Have 10 or fewer employees
For the Supplemental Targeted Advance, you will be asked to provide your gross monthly revenue over an eight-week period starting on March 2, 2020, or later to prove a 50% or greater economic loss.The Small Business Administration will determine whether you qualify for forgiveness for some or all your EIDL Advance (up to $15,000 across both Advances). Those deemed potentially eligible will receive an email from the SBA with instructions to apply for forgiveness of the Advance(s).According to the SBA’s website, all Advances have been allocated and none further will be given.

How Much of the EIDL Loan Is Forgivable?

Are EIDL loans forgivable? Yes and no. It’s important to understand there are two different terms at play here: an EIDL loan and an EIDL Advance. When you apply for an EIDL loan, you may be approved for a loan of up to $2 million. That loan must be repaid. Separately, the SBA will look at your application to determine whether you also qualify for one or both of the EIDL Advances. You may be asked for additional information to prove eligibility.While there isn’t technically EIDL loan forgiveness, there is EIDL Advance forgiveness, and there is a cap on this. You cannot have more than $15,000 forgiven across both the Targeted EIDL Advance and the Supplemental Targeted EIDL Advance. The Targeted EIDL Advance provides up to $10,000 in forgivable funds, and the Supplemental Targeted Advance up to $5,000. The total between the two cannot exceed $15,000.You may receive additional funds with an EIDL loan that cannot be forgiven. It’s important to be aware of this, because in this case your loan will have interest and payments due, and missing one or more of these payments could put your credit at risk.

The Takeaway

So, ultimately, the question of whether EIDL loans will be forgiven has a pretty simple answer. EIDL loans themselves must be repaid, but Targeted EIDL Advances are potentially forgivable.If you need more funds than the EIDL provides, consider applying for a small business loan online at Lantern by SoFi and get multiple small business loan offers from lenders in our network.

Frequently Asked Questions

Which EIDL loans are forgivable?
Will all or part of my loans be forgiven?
How much of the EIDL loan is forgivable?
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About the Author

Susan Guillory

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.
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