Do You Have to Pay Back an EIDL Loan?

Lauren WardUpdated May 2, 2023

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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.

Yes, you have to pay back an EIDL loan. The Economic Injury Disaster Loan (EIDL) program offered by the Small Business Administration (SBA) has two components: a longstanding traditional loan meant to help businesses cover operating expenses in the midst of a declared disaster and a temporary COVID-19 EIDL program intended to help businesses negatively impacted by the pandemic.Both regular and COVID-19 EIDL loans do need to be repaid. However, the SBA offered a deferred repayment schedule for some terms. Additionally, some EIDL advances are structured as grants that don’t need to be paid back. The SBA did allow deferment for a certain period. As the agency says on its website: “Due to the continued adverse effects of the pandemic, SBA 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. Interest will continue to accrue on the loans during deferment.” Read on to learn the details on EIDL and how the news about repayment might impact you.Recommended: What to Do if You Can’t Pay Back Your Pandemic-Related Loan

EIDL Loan vs. EIDL Advance

EIDL loans and EIDL advances are not handled the same way when it comes to loan forgiveness. Understand each one’s repayment requirements.

EIDL Loan

Your EIDL loan is not forgivable. Borrowers do have to pay back EIDL loans according to the SBA’s repayment terms. This can be confusing, especially with all of the different COVID-19 relief programs out there. But if your business received any type of EIDL loan, you must follow the repayment terms just as you would with any other traditional or online small business loan.

EIDL Advance

The only way to get EIDL loan forgiveness was through the Targeted and Supplemental EIDL Advance program. The good news is that there’s no structured process to earn forgiveness like other grant programs. The bad news is that not all small businesses qualify. To be eligible for the $10,000 Targeted EIDL Advance, a business must:

Be located in a low-income area.
Experience a revenue reduction of 30% or more for at least eight weeks since March 2, 2020.
Have a maximum of 300 employees.

Some small businesses were also eligible to receive an extra $5,000 through the Supplemental Targeted Advance. In order to be eligible, applicants must:

Be located in a low-income area.
Experience a revenue reduction of 50% or more for at least eight weeks since March 2, 2020.
Have a maximum of 10 employees.

Recommended: What Does EIDL Stand For & What Is It?

EIDL Loan Terms

Not all EIDL assistance is connected to COVID-19. Small businesses, small agricultural cooperatives, and most private nonprofit organizations located in a declared disaster area and which have suffered substantial economic injury may be eligible for an SBA Economic Injury Disaster Loan (EIDL).Non-COVID EIDL loans come with the following loan terms:

Maximum interest rate of 4%
$2 million maximum loan amount
Repayment period up to 30 years
Collateral required for loans of $25,000 or more

Recommended: EIDL Personal Guarantee

Extended EIDL Deferment Periods

If you’re wondering how to pay back an EIDL loan, you have some time. In March, 2021, the SBA announced deferment for all EIDL loans, including both non-COVID-19 and COVID-19 EIDL loans. The length of deferment depends on when you received your EIDL funds. Recommended: 7 Ways to Manage Your Covid-19 EIDL Loan Difficulties

Which Types of Loans Are Forgivable?

The SBA offered two types of forgivable funding for small businesses impacted by COVID-19. The Targeted and Supplemental EIDL Advances are one type. The other type is the Paycheck Protection Program (PPP). Applications for PPP funding are now closed, but borrowers who received PPP funds should be clear on how to qualify for loan forgiveness.PPP loan forgiveness differs based on first-draw loans and second-draw loans.Recommended: Can I Use My EIDL Loan to Pay Taxes?

Learn More About Small Business Loans From Lantern

An EIDL loan is just one type of financing that small businesses can use to help them through periods of hardship. Before taking out any loan, it’s smart to compare all of your financing options. Financing options could include:

The Takeaway

EIDL loans do have to be paid back, but if you received a Targeted or Supplemental EIDL Advance, you could treat the funds like a forgivable grant.Ready to see if you’re making the most of your small business financing opportunities? Get started with exploring small business loans with Lantern Credit. Users are matched with a single provider in an exclusive match.

Photo credit: iStock/MarsYu

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About the Author

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.

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