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If you’ve heard about the COVID-19 Economic Injury Disaster Loan (EIDL), you might be interested in applying. And, if you’re familiar with EIDL grants, which don’t have to be repaid, that may sound even more appealing.However, SBA is no longer accepting new EIDL grant applications or reevaluation requests. As for EIDL loans, as of January 1, 2022, SBA stopped accepting applications for new COVID-19 EIDL loans or advances and as of May 6, 2022, SBA is no longer processing COVID-19 EIDL loan increase requests or requests for reconsideration of previously declined loan applications. SBA continues to offer other funding options for small businesses including traditional SBA loans.
Read on to learn the latest about EIDL programs, deferrals in EIDL loan repayment, and ways to get financial help for your small business.Recommended: The Essentials on Small Business Financing and Building Credit
What Are EIDL Loans?The EIDL program was originally designed to help businesses affected by natural disasters. During the pandemic, however, the SBA expanded the program to include businesses negatively impacted by the coronavirus pandemic. Small businesses that qualify for the program could borrow up to $2 million with loan terms of 3.75% fixed interest over 30 years.Recommended: How You Can and Cannot Use Your EIDL Loan
Can You Defer Paying Your EIDL Loan?Yes, you can get a deferment."Due to the continued adverse effects of the pandemic," the SBA says it provided a deferment period of 30 months from the date on the original Note for COVID-19 EIDL borrowers. This deferment does not apply to non-COVID disaster home and business loans. This deferment extension is effective for all COVID-19 EIDL loans approved in calendar years 2020, 2021, and 2022. Important: Interest will continue to accrue on the loans during deferment. More detailed information about eligibility and how deferment impacts your future loan payment amounts can be found in SBA procedural notice 5000-830558 dated March 15, 2022.
What Are EIDL Grants?Unlike EIDL loans, which must be repaid, EIDL grants did not have to be paid back. There were two COVID EIDL grant programs:
To qualify for the Targeted Advance, your business had to be located in a low-income community and be able to demonstrate that it has suffered a 30% or greater reduction in revenue over eight weeks starting March 2, 2020 or later. You also needed to have fewer than 300 employees. This Targeted Advance provides a grant of up to $10,000.The Supplemental Advance had even more strict requirements. For a business to qualify, its economic loss must be 50% or greater and it must have 10 or fewer employees. This grant provided up to $5,000. Between the two, you could get no more than $15,000.
- Targeted EIDL Advance
- Supplemental Targeted Advance
EIDL Grants Are No Longer AvailableAccording to an announcement by the SBA, EIDL Targeted Advance applications were accepted until December 31, 2021, and the SBA continued to process after this date until funds were exhausted.
Are EIDL Loans Still Available?No, the COVID-19 EIDL program is not accepting new applications, increase requests, or reconsiderations.Non-COVID EIDLs, which are designed to help businesses located in regions affected by declared disasters, will continue.
Why Would Your Bank Return an EIDL Grant?When a bank returned Targeted EIDL Advance or Supplemental Targeted Advance funds to SBA, the funds were not immediately re-disbursed in some cases.
Sometimes the grant was approved and business owners were informed that funds had been sent to their bank. However, the money never showed up in their account and their bank says it returned the funds to SBA. Some common reasons funds were returned:
You will need to contact your bank to learn the reason specific to your case.
- The account is closed.
- The name or EIN number on SBA’s deposit does not match the name or EIN number on the bank account.
- The applicant provided an incorrect routing or account number.
- The account is a personal account rather than a business account.
How to Use EIDL LoansThere are a few restrictions, but generally, you can use the funds for most operating expenses, including rent and/or mortgage, office supplies, inventory, payroll, and utilities. They can also be used to pay business debt incurred at any time (past, present, or future).You may not use the funds to:
Recommended: Are EIDL Loans Forgivable? Rules and Guidelines
- Expand your business
- Make prepayments on debt that is owned by a federal agency (including the SBA)
- Start a new business
Can You Get an EIDL Loan Hardship Accommodation?For some business owners, repaying an EIDL loan is super challenging.
Hardship Accommodation PlanSBA is offering a Hardship Accommodation Plan for borrowers experiencing short-term financial challenges. Borrowers eligible for this plan may make reduced payments for six months. Interest will continue to accrue, which may increase (or create) a balloon payment due at the end of the loan term.
- Borrowers are required to pay at least 10% of their monthly payment amount (with a $25 minimum), for six months.
- During the Hardship Accommodation period, borrowers can voluntarily make larger payments.
- The regular monthly payment amount will resume and be required after the six-month Hardship Accommodation period ends. Borrowers may be able to renew the Hardship Accommodation Plan, if necessary.
Eligibility & EnrollmentBorrowers are eligible to enroll in the Hardship Accommodation Plan beginning 60 calendar days before their first payment due date. If your loan amount is less than or equal to $200,000: To enroll in the Hardship Accommodation Plan, create a CAFS account or log in to your existing account. Within CAFS, hover over "Borrower" and select "Borrower Search." Select the appropriate loan number and request the Hardship Accommodation on the Loan Info page.If your loan amount exceeds $200,000: To apply, contact the COVID-19 EIDL Servicing Center at 833-853-5638 or [email protected] (and include “Hardship Accommodation Plan” in the subject line). You will be contacted by a loan specialist regarding requirements, says the SBA.
Conventional Small Business LoansYou may qualify for a traditional loan from a bank, credit union, or online lender. Some require higher credit scores, while others have less stringent requirements, though may offer less favorable terms. It is possible, after thorough research, to find a small business loan with bad credit and poor collateral. Even with bad credit, you can present an in-depth business plan that outlines your strategies for success.Your best course of action is to shop around and compare small business loans.
Other SBA Loans and GrantsIn addition to the EIDL program, the SBA offers many other loans to small businesses. The 7(a) loan program is a popular one, and there are others you may qualify for. SBA loans tend to have the lowest interest of all your options.In addition, the SBA offers other types of grants to small businesses that do not have to be repaid.
Employee Retention Tax CreditsWhile it’s not a loan or grant, the IRS’s Employee Retention Credit is a tax credit that could put money back into your company’s coffers.
The TakeawayIf you were unable to get your application for COVID EIDL loan or grant in by the deadline, or your application was denied, you're not necessarily out of funding options. There are a number of other financing options for small businesses, including other types of SBA grants and commercial small business 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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Photo credit: iStock/baona
About the Author
Susan GuillorySu Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.