University of Houston Small Business Development Center
By: Tatyana Parham
Small business owners who have been financially impacted by the COVID-19 (coronavirus) pandemic are able to apply for the Economic Injury Disaster Loan (EIDL), offered by the U.S. Small Business Administration (SBA). In response to the COVID-19 pandemic, the EIDL program offers long-term, low interest federal disaster loans designed to provide economic relief for businesses experiencing a temporary loss of revenue.
An EIDL loan can be used for a range of operating expenses, such as the continuation of health benefits, rent, utilities, payroll, accounts payable, and fixed debt payments. Eligible businesses may qualify for loans up to $2 million, with a 30-year interest rate at 3.75% for small businesses and 2.75% for non-profit organizations. Eligibility for these loans are based on the size and type of business, and its available financial resources.
**Update: As of July 13, 2020, the SBA has concluded the $10,000 EIDL Advance Program, which provided U.S. small businesses, non-profits, and agricultural businesses a total of $20 billion in emergency funding.
To apply for an SBA Economic Injury Disaster Loan, click here.
Small Business Eligibility
What's classified as an EIDL eligible business activity? Any small business with less than 500 employees, including sole proprietorships, independent contractors and self-employed persons, along with private non-profit organizations or veteran organizations, are eligible for an EIDL loan, as long as your business is physically located in a disaster area. (As of this writing, all 50 states have been declared as a disaster area due to COVID-19).
Eligible business activities include:
Your business must have a physical address to apply for the disaster loan - PO Boxes don't qualify. Examples of eligible industries include restaurants, retailers, manufacturers, sports vendors, rental property owners, travel agencies, hotels, recreational facilities, wholesalers, etc. The SBA also requires that your business must have been in operation before January 31, 2020.
Determining if your business classifies as a small business, according to the SBA, is based on a size standard that varies by industry, which is typically the average of your annual receipts or the average number of employees. In order to see if your business qualifies as a small business, you can use the SBA's Size Standards Tool.
Other factors to note about loan eligibility:
Private Non-Profit Eligibility
In addition to small businesses, private non-profit organizations may also apply for an EIDL loan. Eligible types of non-profits include nursing homes, food kitchens, museums, educational facilities, senior citizen centers, daycare centers, community centers, shelters, associations, rescue organizations, etc.
An eligible private non-profit organization is a non-governmental entity that has:
Non-profit status can be based on either state or federal tax law, and all non-profits will need to provide tax return to determine eligibility, regardless of loan size. The SBA encourages all non-profits to apply for a disaster loan, even if you're unsure of eligibility.
Ineligible Business Activity
What are some types of businesses that are ineligible for an EIDL loan? Although most small businesses are qualified to apply for a disaster loan, the SBA doesn't deem certain business activity as eligible for assistance.
Ineligible entities include:
If your small business has been negatively impacted by the COVID-19 pandemic, it is suggested you apply for an SBA EIDL loan for access to funds that will help you maintain your business and keep it afloat during these challenging times. Please keep in mind that the SBA ultimately determines business eligibility based on information provided in your application, and loan officers review each loan package to decide what's that best fit for you and your business.
For more information on the SBA Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP), click here.
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