The Economic Injury Disaster Loan (EIDL), also called the SBA Disaster Loan, is one of the measures that the government has taken to help businesses during the COVID-19 pandemic. New applications opened on June 15th. At that time, it became easier for certain businesses to qualify for the loan. In fact, even freelancers and other sole proprietors now qualify. Do you?
What is the SBA Disaster Loan?
The Small Business Administration offers a wide range of support and resources to small businesses. The SBA Disaster Loan is one of those resources.
First, there has to be a declared disaster. The COVID-19 pandemic is just one such example of a declared disaster. It has obviously impacted a large number of small businesses. Therefore, it’s exactly the type of situation that the loan helps remedy.
Once a disaster has been declared, small businesses can apply for assistance. In certain cases, SBA disaster loans also assist homeowners and renters whose property has been damaged. In the case of coronavirus, the damage is economic. Thus, the official name: Economic Injury Disaster Loan (EIDL).
What is the COVID-19 Economic Injury Disaster Loan?
Through this program, small businesses can apply to receive economic relief. If you are a sole proprietor or small business owner who has suffered losses due to COVID-19, then you might qualify for this loan.
Who Qualifies for this SBA Disaster Loan?
When you apply for the loan, you’ll select your status from the following options
- Agricultural business with 500 or less employees
- Coops with 500 or less employees
- Tribal small business
- Other business with 500 or less employees
- Other business with more than 500 employees that meets the SBA Size Standards for a small business
- Private non-profit with IRS tax exemptions under certain code sections
- Sole proprietor or independent contractor with or without employees
If you qualify as one of those businesses, and your work has been negatively impacted by coronavirus, then you might be able to get an SBA Disaster Loan.
There are certain things that can disqualify you. For example, if you are a primary business owner who owes unpaid child support, then you might get disqualified from receiving the loan.
What is the SBA Disaster Loan Advance?
One of the things that might feel a little bit confusing is that there is the loan itself then there is a loan advance. You can apply for loans of varying amounts. Additionally, you can also apply for a loan advance of up to $10,000. You apply for it at the same time that you apply for the primary loan.
Some small businesses qualify for this advance even if they are not approved for a loan. Moreover, the loan advance never needs to be repaid.
SBA Disaster Loan Terms
The entire point of this business loan is to support small businesses during economic tribulations. Therefore, the terms of the loan are excellent compared to private loans. Some of the details include:
- Low interest rate (3.75% for businesses, 2.75% for non-profit organizations)
- Long period of repayment, up to thirty years
- First payment is deferred for one year after receiving the loan
Small businesses can use the loan to pay their employees, pay off business debt, and cover most other business expenses. The loan is different from the Paycheck Protection Program loan. If your business received that money, use that first to cover those costs. Then use the disaster loan for any payments still not covered.
The big change that’s happened with these new loan terms is that sole proprietors and freelance employees are now more likely to qualify for assistance. Have you tried to get an SBA Disaster Loan? Share your experience in the comments below.
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