The Economic Injury Disaster Loan Program: Potomac Law

Small businesses impacted by the coronavirus crisis may be eligible for assistance under the newly expanded Economic Injury Disaster Loan (EIDL) program, part of the Coronavirus Aid, Relief, and Economic Security Act just passed by Congress. The EIDL is a low interest, emergency loan program, designed to enable employers to retain employees and cover overhead costs.

This Alert provides a brief summary of the EIDL for our small business clients. Additional details can be found on the SBA’s website. If we can help, please don’t hesitate to reach out.

Who is Eligible for the Economic Injury Disaster Loan (“EIDL”) program?

The following businesses are eligible to apply for loans if they are located in a U.S. state, territory or Washington D.C., and they suffered “substantial economic injury” from the COVID-19 crisis:

Small businesses or nonprofits with no more than 500 employees or small under SBA Size Standards
Sole proprietors and Independent Contractors
Cooperatives, ESOPs or tribal small businesses with fewer than 500 employees

What are the terms of the loan?

Maximum loan amount: $2 million (amount keyed to borrower’s actual economic injury)
Additional funds: up to $10,000 advance (essentially a grant that borrowers need not repay; funds disbursed within 3 days, much more quickly than loan funds)
Interest rate: 3.75% for small businesses; 2.75% for most private nonprofits
Term: Up to 30 years (term keyed to borrower’s ability to repay); deferred for 12 months
Loan forgiveness: Not available
Personal guarantees: Not required for loans under $200,000; required for larger loans
Collateral: Not required for loans under $25,000
Approval criteria: Acceptable credit history; ability to repay loan

What can I use the money for?

EIDL funds are to enable your business to meet costs that it is unable to meet as a result of COVID-19. These costs include fixed debts, payroll, accounts payable, increased costs due to supply-chain interruption, and other expenses.

Some business expenses cannot be paid with these funds, including bonuses, disbursements to owners (except for the performance of services), facilities expansion, and paying down long-term debt.

What do I have to do and when?

Apply as soon as possible
Certify that the applicant does not fall within the small number of EIDL exclusions (e.g., less than 1/3 of gross revenue from legal gambling; not in the business of lobbying; no principal is >60 days delinquent on child support)
Quantify past revenues and COVID-19-related losses
Provide any additional documents that may be requested

Can I get help with my application?

Free assistance is available from SBA partners such as Small Business Development Centers, Women’s Business Centers, Veteran’s Business Centers, and local Chambers of Commerce.
You may also seek assistance from an appropriately qualified attorney.
Potomac Law Group has a number of long-standing relationships with many national, regional and local banks and other financial institutions offering SBA loans.