Economic Injury Disaster Loans (EIDL)
What is Economic Injury Disaster Loans (EIDL)?
COVID EIDL loans are distinct and different from regular Disaster Loan Program loans. “COVID EIDL” stands for COVID-19 Economic Injury Disaster Loan. In response to the COVID-19 pandemic, SBA was given the authority to make low-interest fixed-rate long-term COVID EIDL loans to help small businesses and other entities overcome the effects of the pandemic by providing borrowers with working capital to meet ordinary and necessary operating expenses.
Frequently Asked Questions
Applicants must be physically located in the United States or designated territory and must have suffered working capital losses due to the Coronavirus pandemic. The COVID EIDL application contains specific eligibility screening questions. A sample application is provided for reference.
If the Applicant business (or the owner, if the business is a sole proprietor or an independent contractor) is currently in bankruptcy:
• The Applicant business is eligible if it is operating under an approved plan of reorganization under either a Chapter 5, Chapter 11, Chapter 12 or Chapter 13 bankruptcy. In order to receive COVID EIDL funds, Applicant must provide SBA with evidence of approval for the loan by the court/trustee for the bankruptcy case.
• The Applicant business is NOT eligible if it:
o Filed for either a Chapter 5, Chapter 11, Chapter 12 or Chapter 13 bankruptcy but no plan of reorganization has been approved
o Filed for a Chapter 7 bankruptcy, is undergoing a liquidating Chapter 11, and/or is permanently closed (Applicant is not eligible)
If you were “in operation” before Jan. 1, 2020:
2019 Federal Income Taxes, including all schedules, for the applicant business (required)
2020 Federal Income Taxes, including all schedules, for the applicant business (if available)
If the most recent Federal income tax return has not been filed, a year-end profit-and-loss statement and balance sheet for that tax year
For nonprofit organizations, a complete copy of the organization’s IRS tax-exempt certifications and complete copies of the three most recent years of “Statement of Activities” IRS Form 4506-T (You will complete this online when you apply)
After loan approval and before loan closing:
If your business is not a sole proprietorship, you will be required to provide a Board resolution or certificate of authority providing authority to commit the business to the COVID EIDL loan. You may use your own Board resolution or ODA Form P-022 –Resolution and Certification Form.
If you started being “in operation” on or between Jan. 1, 2020 and Jan. 31, 2020:
2020 Federal Income Taxes, including all schedules, for the applicant business (if available)
If 2020 Federal Income Taxes for the applicant business are not available, you must submit internally or externally prepared business financial statements including balance sheet and profit and loss statement.
For nonprofit organizations, a complete copy of the organization’s IRS tax-exempt certifications and complete copies of the years of “Statement of Activities” since inception
After loan approval and before loan closing: If your business is not a sole proprietorship, you will be required to provide a Board resolution or certificate of authority providing authority to commit the business to the COVID EIDL loan. You may use your own Board resolution or ODA Form P-022 –Resolution and Certification Form.
Additional information that must be submitted for loans greater than $500,000:
• SBA Form 2202 – Schedule of Liabilities
• List of Real Estate Owned
• SBA Form 413 – Personal Financial Statement for general partners, managing members, and all owners of 20% or more of the applicant business (Not required for nonprofit organizations)
Additional information that may be requested after you submit your application:
• Copy of government-issued photo identification of each principal owning 20 percent or more of the applicant business
• Current year-to-date profit-and-loss statement
• For loans less than or equal to $500,000: Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used)
You must be able to prove your business was in operation on or before January 31, 2020. You may be asked to provide this documentation to prove your business was in operation on or prior to Jan. 31, 2020.
All owners, members, partners, or shareholders of 20% or more of the business must be:
• US citizen with Social Security Number (SSN); or
• Non-US citizen who resides in the U.S. and is classified as a “non-citizen national” or “qualified alien” with SSN. Qualified aliens include permanent residents with a current green card
The way you apply is determined by how you file your federal taxes. For example:
• If you operate three locations but report all sales in one federal tax return, you should complete one application for all of your locations;
• If you operate three locations and file a separate federal tax return for each location, you should complete a separate application for each location;
• If you are a sole proprietor with multiple businesses:
o If you report your business’s revenues on a single Schedule C, you should complete one application;
o If each of your businesses has its own tax identification number and you file separate Schedules C, you should complete a separate application for each business
For loans up to $500,000, your maximum eligible loan amount is determined by a formula based on the date you began operations. You will have the opportunity to choose your loan amount, which must be equal to or less than the maximum eligible loan amount calculated by SBA.
If you were in operation before January 1, 2019, your maximum eligible loan amount is calculated as follows: 2019 gross receipts or sales minus 2019 costs of goods sold multiplied by 2, or $500,000, whichever is less.
For applicants that began operations partially through 2019 or 2020, SBA will calculate your maximum eligible loan amount.
For applicants using rental loss, SBA will calculate your maximum eligible loan amount. For loans greater than $500,000, SBA will underwrite your loan. As part of its underwriting, SBA will perform a cash flow analysis for your business to confirm your business’s ability to repay the proposed COVID EIDL loan as well as your business’s existing debt obligations.