What is the Economic Injury Disaster Loan Grant and What Does it Mean for Small Business?

What is the Economic Injury Disaster Loan Grant and What Does it Mean for Small Business?

What is the Economic Injury Disaster Loan Grant and What Does it Mean for Small Business?

This article was updated on April 3 to clarify that there is no guaranteed amount for the EIDL advance/grant. We want to correct original guidance we gave regarding the $10,000 grant—it’s a common misconception, but after reading the law and hearing from some who have applied for the grant, we want to clarify that the advance is up to $10,000—you are not guaranteed a full $10,000 advance on your EIDL.

Part of the Economic Injury Disaster Loan (EIDL) is what many are calling a grant up to $10,000 for those who submit an application for disaster assistance. It works more like an advance that does not require repayment—whether or not your loan application is approved. In other words, if you meet the qualification criteria to apply for an EIDL loan, submit an application to the SBA, and you will receive up to a $10,000 advance within three business days—that does not need to be repaid.

What is the Qualification Criteria to Apply for an EIDL Loan?

The criteria for qualifying is somewhat relaxed when compared to a typical SBA loan and may even see some changes. Also, unlike a typical SBA loan, or even the Paycheck Protection Loans (PPL) that are on the way, the application is going directly to the SBA rather than a bank or other lender. The qualification criteria will look something like this:

  • Businesses with fewer than 500 employees (with some exceptions)
  • Businesses that were in operation before January 30, 2020 (this date is different from what is required in the PPL—which is February 15, 2020)
  • Businesses that meet the SBA’s industry-based size standard requirements for applicable NAICS code,which are based either on number of employees or annual receipts (you can see if your business credit reports list your NAICS code by pulling your business credit reports for free on Nav)
  • Not-for-profits (except those receiving Medicaid funds)
  • Veterans organizations

You should also be prepared with:

  • Your 2019 business tax return if filed, or your 2019 year-end profit and loss statement, along with your balance sheet and the most recently filed business tax return
  • 2020 year-to-date profit and loss statement
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If you need help with your application, you can talk to one of our Lending and Credit Specialists who can help you complete your application free of charge. You can also contact the SBA directly by calling 1-800-659-2955 or via email at disastercustomerservice@sba.gov, but to apply for the EIDL, the SBA is suggesting you make your application via the SBA’s online portal.

If you’ve already applied for the EDIL and weren’t asked for your bank account information, the SBA is suggesting that you submit another application—particularly if you are looking for the advance. Your bank information will allow them to directly deposit the advance in your business bank account.

NOTE: If you applied for an EDIL last week, there was a data glitch and some small business’ information was compromised. Because you can’t freeze your business credit report like you can with your personal information, we are recommending that you immediately begin monitoring both your personal credit and your business credit. You can monitor your credit for free at Nav. If you’d like to know more about the data breach, click HERE.

What Does the EIDL Grant Mean for Small Businesses?

The Economic Injury Disaster Loans generally are attractive for a number of reasons, including:

  • Loans up to $2 million are available 
  • The disaster loans come with low fixed interest rates of 3.75% or 2.75% for non-profits
  • The repayment term is up to 30 years, reducing the monthly cash flow burden
  • There are no prepayment penalties
  • Although interest will accrue, payments may be deferred for six months
  • The money is available in all 50 states
  • The time-in-business requirement has been waived, provided your business was operational on January 31, 2020.

The grant associated with the EDIL makes it possible for any business that meets the minimum requirements to apply, able to receive up to $10,000 almost immediately (the SBA is shooting for three days) that they can use the funds without the requirement to repay the loan. 

These working capital loans (including the grant) may be used only to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. The loans are not intended to replace lost sales or profits or to pay for expansion. Funds cannot be used to pay down long-term debt. They also cannot be used to consolidate debt.

What if I Have Less-Than-Perfect Credit?

Although the qualifying criteria for making an application may be somewhat relaxed, there are some credit issues that could disqualify you:

  • Your are more than sixty (60) days delinquent on child support obligations
  • You have judgements against you for federal debts and you have not worked out a satisfactory repayment plan
  • You have federal tax liendres of more than $10,000 (you could still qualify, but you must provide a satisfactory explanation and be able to repay the tax debt—it’s recommended you work out a payment plan with the IRS as soon as possible

Fortunately, the SBA is not requiring exceptional credit to apply for these loans, but you should be prepared to include an explanation for your current situation with your application. Guidelines for those who process SBA Disaster Loan applications state:

“For disaster lending purposes, satisfactory credit history is defined as a history that generally shows payments to creditors as agreed unless otherwise justified… 

Generally, a history that consists of minor, isolated instances of adverse credit or late payments is acceptable. Major instances of adverse credit such as unpaid judgments, repossessions, previous foreclosures, charge-offs, and unpaid collections can be overcome provided: 

    1. The applicant explains the lapse; and 
    2. The applicant has other accounts with “as agreed” payment records. 

For purposes of evaluating adverse information found on an applicant’s (credit reports), the information should be considered within the totality of circumstances; for example, financial difficulties caused by one-time situations such as divorce, job loss, serious medical illness, etc.

For purposes of disaster lending, medical collections are not considered adverse information.

Non-medical collections or charged off accounts with an aggregate of $10,000 or less and foreclosures or deed-in lieu of foreclosures which occurred more than two years from the date of the loan application are all considered an acceptable credit risk and do not require any additional justification.”

That being said, there is no guarantee that you will be approved for the loan if you have a poor credit history. Fortunately, the grant of up to $10,000, associated with the loan does not need to be repaid even if your loan application is rejected.

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The Economic Injury Disaster Loan Grant: The Bottom Line?

If you meet the minimum requirements to apply for a disaster loan, the grant will be available to you whether or not your loan application is approved. With that in mind, if you need access to capital quickly, and don’t need a larger loan amount, this may be a good option for you.

The Paycheck Protection loan is another option to consider. It’s based upon the 7(a) loan program. A good place to start is looking at the Paycheck Protection Loan Calculator to help you determine the loan amount you should be looking at. You can also visit with one of our Credit and Lending Specialists and they can help you make an informed decision about which program will best suit your needs.

See How Much SBA Loan Money You Qualify For

See How Much SBA Loan Money You Qualify For

Use our CARES Act SBA loan calculator to see how much money your business may qualify to get.

Use the Calculator

Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not solely rely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs, and Financial Advisors. To review your real-time funding options with one of Nav’s lending experts, please contact us.

 

This article was originally written on March 31, 2020 and updated on June 3, 2020.

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ABOUT AUTHOR

Ty Kiisel

Ty Kiisel

Ty Kiisel is a Main Street business advocate, author, and marketing veteran with over 30 years in the trenches writing about small business and small business financing. His mission at Nav is to make the maze of small business financing accessible by weaving personal experiences and other relevant anecdotes into a regular discussion of one of the biggest challenges facing small business owners today.

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108 responses to “What is the Economic Injury Disaster Loan Grant and What Does it Mean for Small Business?

  1. I own a hair salon with 8 people renting booths from me. No one paid there rent when we were shut down. I applied for the EIDL/advance and received 8000. Is this correct or should I return the money because they are not pay roll employees.

  2. Hi Can you apply for the EIDL disaster relief even if you didn’t make enough money to pay taxes? I didn’t file last year’s business because I didn’t make enough money.

  3. Good evening, what if a person lied to get the grant? Saying they have a business but don’t, do they could go shopping, purchase a new Vechicle, drink, party, and move into a bigger place. Edgar could happen if the government monitor they personal account, where they deposit the $10,000?

  4. you answered 1 question about getting both a PPP and the EIDG loans with no double dipping and use both for different purposes, and the next time you answer no double dipping and use both for the same purpose. Can you clarify? My question would be can I use both for payroll costs for the next 8 weeks?

    1. Peter – there are still questions about how the two intersect. What we know so far is that according to the CARES Act it appears the amount of an EIDL advance (grant) must be subtracted from the PPP for forgiveness purposes. (No additional guidance so that’s our understanding based on what the Act appears to say. But it is certainly not legal advice or interpretation.) The EIDL loan– which is in addition to the grant– may be used for working capital purposes which is broader than payroll. Hopefully there will be additional guidance from SBA and Treasury.

      1. My husband have an auto repair shop. March 30, I have applied for him through EIDL loan. Was it just one application for both advance and loan? Keep waiting and waiting until couple days ago , they sent me an email say I have to verify some information to receive the loan up to 20,700$ with 3.75 interest rates. Just wondering how the loan work and is it some of the loan are forgiveness? I hope to hear from you soon!

  5. I applied for the PPP and was recently approved. I also applied for the EIDG and didn’t hear anything about it; I wasn’t denied or approved. In the meantime, all additional paperwork was turned in and my local bank has assured me the money for the PPP will be deposited into my account soon…hooray! Upon looking at my account today I noticed a deposit made from the Treasury for a different amount than what was awarded to me through the PPP. After doing some calling around it has been determined that the money is actually from the EIDG that I applied for…double hooray!! So I was awarded both, but I never received any information about the EIDG alerting me of my award or any further action needed to be taken. My question is, can I accept both the PPP and the EIDG without penalty? Or do I need to choose which one I would like to accept and decline the other? I understand the grant does not need to be paid back and neither does the PPP if I use it correctly. No one seems to have any information about this, not even the bank. I would love some guidance, can you help?

    1. I’m not an expert & someone can correct me if I am wrong but I believe I read somewhere. That they will deduct the EIDG ( if same as EIDL ) out from the PPP amount you receive. I would ask your lender who did your PPP loan or go onto the SBA website in regards to these loans for I think it was there I read this info on.

  6. I applied for an economic injury disaster loan. I gave them my bank account number. I am a sub s corp. I am receiving unemployment. Can I receive both? If not, can I withdraw my EIDL application?

  7. I have received my Advance. What record keeping do I need to do or what steps do I need to take now to make sure I keep everything straight for the grant portion?

  8. I own a small cleaning business. I am the only employee. I want to apply for the EIDL grant only. I dont want to apply for loans at this time. Can I still do that? Or do I have to apply for a loan in order to get the grant that I dont have to repay?

    1. Check your bank account and your email (including the spam folder). You can call the SBA Disaster Assistance hotline to check on the status of your application but I’m not sure they can give you an exact date as they are processing so many applications.

  9. I received $1000 advance this morning. Just because I receive the advance does NOT mean that I have yet been approved for the EIDL; correct?

      1. Hello,
        I applied as 1099 3/31. My kid applied as 1099 4/1. She got a $1000 deposit today and I did not. Is the $1000 per “employee” guaranteed? If I applied 1st and my application number is way ahead of hers does this mean I’m not getting it?

        1. I own my own business and am the only employee. I want to apply for the EIDL grant only. I dont want to apply for loans because I won’t be able to repay them. I submitted the application and was pre-approved for $11,100. Do I have to continue the process to receive the grant or can I just let the 2nd step in the loan process sit there without completing it?

  10. You are wrong and there is a lawsuit going on now about that fact. The SBA made up their own rule about $1k per employee. That is NOT in the law. Please get your information correct before posting something misleading.

    Here is the attorney who filed and there are politicians sending notices to the SBA about what they are doing.

    Meet Kevin on Youtube

  11. I just received $1000 in my account. I am very confused as I thought I didn’t even finish the application. Do I need to repay this? Do I need to prove I have use it for anything in particular?

  12. I just received the EIDG (grant) deposited into my business checking account. I applied for the EIDL, I believe on April 3rd. I own a very small business with only 3 employees that has not been entirely shutdown during this crisis. I called the SBA last week (waited almost an hour) and asked a status of the EIDL application and they told me I was in the queue and it would be a matter of days. It turned out to be a week, but for the government that isn’t too bad. That’s just my experience.

    1. I own my own business and am the only employee. I want to apply for the EIDL grant only. I dont want to apply for loans because I won’t be able to repay them. I submitted the application and was pre-approved for $11,100. Do I have to continue the process to receive the grant or can I just let the 2nd step in the loan process sit there without completing it?

      1. You don’t have to accept the loan. The grant is a separate process and rejecting the loan shouldn’t disqualify you. Usually it happens before the loan. You may want to ask the SBA Disaster Assistance hotline what happened to your grant.

  13. I applied for EIDL on 03/30/2020 I like one of your other commenters have heard absolutely nothing. Are you aware of any site crashes on their end that may have occurred? Also, would you advise applying again and or just hold tight?

  14. Apparently the company I work for did get the loan. We have less then 500 employees with all of our locations combined. We were told that we had to be laid off, given our business # & tax ID # with an approximate date of return, & information to file for unemployment. We were called today with a return date of may 4th. We may have to do job-share split 40hrs between 2 employees when we go back until business picks up again. Is this allowed? If so, are wr able to voluntarily stay on unemployment until the disaster is over? This is a huge concern due to the fact that we make more on unemployment yet less then we do working as a full time employee, however, job share split is less then unemployment.

      1. Is the entire EIDL grant and entire PPP LOAN forgiven if you can justify the expenses accordingly during required 8 week period or does the grant amount affect the PPP forgivable portion?

        1. EIDL grants don’t have to be repaid. PPP is a separate forgiveness process. We’ve written about that here: How to Apply For Forgiveness for Your Paycheck Protection Program Loan But keep in mind you cannot use the EIDL grant and PPP funds for the same purpose (in other words, no double dipping).

          In addition, the EIDL grant may reduce the amount of PPP forgiveness. At least currently it appears you must subtract the amount of the EIDL grant from the PPP when applying for forgiveness.

  15. How long after the 10 k grant will we know about the actual loan? 10 k will definitely help pay my last payroll and rent but then I’m back to zero?
    Thank you

  16. I am somewhat confused. I applied for the 10,000. I understand that total amount may not be awarded. My question is do I have to apply for the larger loan. The 10,000 is all that is needed.

  17. I am a landlord with multiple commercial properties and each property is in a different LLC. I applied for the EIDL on April 4 . On the application I put down the amount of loss from rental income due to tenants not paying. I also put down 0 employees as I dont have any employees and I get a K1 at the end of the year. Without the rent income, I cant pay the mortgage. Will I still get aproved for the $10K grant from EIDL?

  18. Can you use the grant given from the EIDL to pay credit card debt that you had from equipment purchased on 2019?

  19. Can you receive both the PPP loan and the Economic Injury loan? If they are used for diffferent needs to stay in business?

  20. Is the SBA going to let my business fail which will lead to the loss to 12 employees because I have a felony charge for non-violent or sexual charge? I have a credit rating of 825 and have been in business for 35 years.

  21. Can you just get the grant without applying for a loan? I run a very small independent contractor booth rental salon and really just need about 10,000 to get me through the next few months to pay rent, bank note and bills while the salon is closed and the girls aren’t paying me their weekly rent. I am not finding a cut throat answer on this. Or, do you only qualify for the 10,000 grant if you apply for an actual loan?

    Thanks so much!!

      1. I think what Shannon Brents may have been getting at is the online application does not ask you how much $ you would like to borrow. If I only want to borrow 10,000 then it becomes a grant. If you apply online does the SBA pass your loan along to a bank of their choice. The online application was way to easy and now Nav is saying my application was or may have been compromised after
        entering my checking & routing #s. Very Comforting NOT.

          1. I applied for the EDIL the end of March. I received a vague email stating the SBA is giving $1000 per employee. I gave my business info and business account number. My credit was pulled a couple of weeks ago and I have good credit but I haven’t heard anything else and no deposit. I called to check the status and was told they are working on my file. Do they normally pull your credit for the EDIL?

  22. 1) If you are a landlord and anticipate lost rent now (this next month), do you just wait to apply or apply now?
    2) if you are a sole proprietorship of a business with lost sales b/c of the economic drop, do you apply now or after the month in which you would have had the sales? I did read how it didn’t apply to lost sales, but that part seemed to be a little vague.
    3) If you do get the grant, what do you have to do to show that you have used the grant money according to the rules?
    4

  23. I’d like to make a suggestion – Please, simply go through the process and read along the way. This article is still rife with mal-informed assertions. It takes very little time and you can always bail out of the form just before submitting it for approval.

    1. We’re trying to keep up with a flood of information coming out on this program and the CARES Act. We are updating these articles as soon as new information is available. If you see something specific you believe is wrong it will be helpful if you point it out so we can research and clarify as needed. Appreciate it!

    2. Same here. I applied days ago as well and haven’t heard anything back yet. Do you know what the turn around time is for a response?

      1. If you are asking about the EIDL disaster loan, I don’t know what the timeline for the SBA will be, I’m sure they are overwhelmed with applications right now.

        If you submitted an application to Nav for the PPP, because the volume of applications is so high, I can’t give you a definite timeline right now, but we expect to have more information about a timeline soon—-at least in the next day or two.

  24. Hello I own a upholstery shop in Phx Az. I phone is blowing up. People are calling wanting face masks. I can make them. But with no capital, I won’t be able to pay my employees and materials and keep the doors open. Would qualify for a grant? and if so how much?

    1. Craig if your business was in business by January 31, 2020 you can apply. It’s not designed to finance a new business but to cover working capital the business could have paid if the disaster had not occurred.

  25. I take issue with the recent-ness of this article. They’re not even releasing the grant Advance to this date and we’re going on day 5 since the application for it was issued. I think this should be clarified more than the amount discrepancy.

  26. I have 4 employees and I pay them with business checks for hours worked and do not use any payroll service or make any deductions from their checks. I issue them 1099 at the end of the year and they file and pay their taxes. Do I qualify to apply for the paycheck protection Loan?

    1. If they are 1099 contractors and you do not withhold payroll taxes they are not considered employees. Contractors apply on their own for PPP so you do not include them in your payroll calculations.

  27. Was one of the first few thousand to apply early Sunday afternoon, and despite the “within 3 days” language of getting the EIDL grant, have received nothing 6 days later. Word on the street is the SBA is altering the bill to be significantly different than it reads. Now they say it is going to take weeks to get the grant and even longer to get the EIDL loan.
    Many have spoken to Senators offices and each and every one of them is disgusted that the SBA is rejecting the spirit and letter of the law they passed.

  28. Hi Ty,
    This is really a nicely written article and precise to the point and easy to understand.

    I never took an SBA loan before so I do not understand many details of the SBA program. However, I find this disaster loan program quite beneficial for the business. Do you know how they determine the total loan amount? Its certain percentage of revenue, cost of goods sold, payroll, fixed payments etc?

    I appreciate your good work.

    1. That’s a great question Raj. These loans have traditionally been to help small businesses who suffered a physical disaster (hurricane, flood etc.) and I don’t have a COVID-specific answer or formula for you. Overall these loans aren’t designed to replace lost sales or profits, but are intended to help the business meet payroll, fixed debts, accounts payable, and other expenses that could have been paid had the disaster not occurred. They are going to compare information from the prior year to this year to determine the economic injury. I wish I could be more specific!

  29. Has anyone received the 10,000 grant or been approved for the EIDL?
    Or, has anyone heard anything substantive?

    1. I’ve received nothing and I was early. From what I’m hearing from many, nobody has received a penny yet, despite the “within 3 days” language. Many have spoken to Senator’s offices and they’re all disgusted that the SBA has simply refused to follow the plain language and spirit of urgency of the bill. 🙁

    1. How much employee you put on your form. I have seen people cheating the system by putting 11 employees to get the max benefits. Actually, I have seen 5 instances so far.There was no check or validation from the SBA. This is really making me angry.

      1. Andy,

        I would not advise falsifying the loan application. Doing so could result in federal prosecution in addition to prohibiting the borrower from any future SBA loan. When you fill out the loan application, make sure it is accurate. Don’t inflate your employee numbers to get the maximum benefits.

  30. Hi,
    Do you know what the loan officer will be looking at in order to approve a EIDL Grant? Is it the net gross, profit, or number of employees?
    Just wondering if we got a chance at getting it as a sole-proprietor with no employees.

  31. For the application purposes of the EIDL what is the difference between
    self-employed vs Sole Proprietorship?

    1. Sole Proprietorship is a specific legal entity. You could still consider yourself as self employed if your business was an LLC, for example. An LLC is not a sole proprietorship. If you are not an LLC and you pay your business taxes when you file your personal taxes, you would be considered a sole propritorship.

      1. so what you’re saying is I am a sole owner I’m a very small wholesale business oh, I pay my taxes every year and whatever money I make off the business it stays in the bank to pay for bills and also more product. So what you’re saying is I can get a loan

      2. I think a point of clarification should be made regarding LLC‘s… Single-member LLCs are filed on personal tax returns whereas partnership LLC‘s
        file the partnership K-1 with their taxes.