The "CARES" Act was signed into law by President Trump on March 27th, 2020. This expands the Small Business Administration's existing Economic Injury Disaster Loan Program (EIDL), allowing for qualified small business owners to receive an advance of up to $10,000.
Here is your step-by-step guide on how to apply:
Step 1: Determine Your Eligibility
You are eligible if you are one of the following entities:
Business with fewer than 500 employees
Most Private Non-Profits
Cooperatives, ESOPs, and tribal small businesses with fewer than 500 employees.
Your business was in existence on January 31, 2020.
Your business has suffered substantial economic injury caused by a disaster.
Step 2: Understand the Loan's Parameters
Payments on Coronavirus EIDL loans are deferred for one year.
The maximum EIDL is a $2 million working capital loan at a rate of 3.75% for businesses and 2.75% for nonprofits with up to a 30-year term.
Up to $200,000 can be approved without a personal guarantee.
Approval can be based on a credit score and no first-year tax returns are required.
Borrowers do not have to prove they could not get credit elsewhere.
No collateral is required for loans of $25,000 or less. For loans of more than $25,000, general security interest in business assets will be used for collateral instead of real estate.
The borrower must allow the SBA to review its' tax records.
Step 3: Understand the Emergency $10,000 Grant
Eligible applicants for an EIDL can receive a $10,000 emergency grant within three days of application (through Dec. 31)
There is no obligation to repay the grant.
To receive the $10,000 emergency grant, it is not necessary to have an approved EIDL loan.
NOTE: If you are able to secure a PPP loan, the $10,000 grant will be subtracted from the forgiveness amount.
Step 4: Read the notice below and click to apply through SBA
Please note that the Paycheck Protection Program (PPP) Created by the CARES Act prohibits borrowers from taking out two loans for the same purpose.
Economic Injury Disaster Loan Program Frequently Asked Questions (FAQs)
How much does it cost to apply?
There is no cost to apply.
How do I begin the loan application process?
Submit a completed loan application and a signed and dated IRS form 4506-T giving permission for the IRS to provide SBA your tax return information. Businesses in addition to the application and the IRS Form 4506-T will also need current information such as a personal financial statement, a schedule of liabilities and a copy of your most recently filed Federal income tax return. Additional information may be required depending on individual circumstances.
Where do the funds come from?
Funds come directly from the U.S. Treasury.
How much can I borrow?
The amount SBA will lend depends on the cost of repairing or replacing your business and business contents, minus any insurance settlements or grants. These loans could not exceed $2 million to repair or replace damaged property or economic injury. SBA can also lend additional funds up to 20 percent of the verified losses to help make improvement to the property (both real and contents) that protect, prevent or minimize the same type of disaster damage from occurring in the future (mitigation).
By applying, am I obligated to take the loan?
There is no obligation to take the loan, if offered.
Is collateral required for these loans?
Loans which exceed $25,000 must be secured to the extent possible. SBA will not decline a loan if you don’t have enough collateral, but will ask for whatever collateral is available which may include real estate owned by a business’ principals.