What is the Economic Injury Disaster Loan and how can it help small businesses?

Editor’s Note: The article below was originally published on September 3, 2020. It includes updates from the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act and American Rescue Plan Act. 

Last spring, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, a sweeping new law created to help individuals and small businesses who are suffering financially by the coronavirus pandemic. A significant part of the act is the Economic Injury Disaster Loan, or EIDL.

While this small business loan has been around for some time, the Small Business Administration (SBA) expanded eligibility for businesses impacted by COVID-19 recently.

Read on and we’ll walk you through what funding is currently available, its application process, and requirements so you can figure out if it’s a good fit for your small business.

What is the history of the Economic Injury Disaster Loan (EIDL)?

As millions of businesses quickly pivoted into the “red” post-virus outbreak, loans such as this one could be a saving grace.

economic injury disaster loan

The Economic Injury Disaster Loan is a small business loan from the SBA. Historically, it has been used for disaster areas from non-farm, private-sector disaster losses. In 2020, it’s been promoted as a key government small business loan to use for the economic effects of the Coronavirus outbreak as part of the CARES Act.

The CRRSA, which was passed in December of 2020, provided a Targeted Economic Injury Disaster Loan (EIDL) Advance payment of up to $10,000 for applicants located in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to lack of available program funding, including shuttered venue operators.

The American Rescue Plan Act, which was passed in March 2021, has extended the coverage. In fact, the Act approved an additional $15 billion for targeted EIDL advance payments, including $5 billion for Supplemental Targeted EIDL Advance payments of $5,000 for those hardest hit. To be eligible the business must have suffered an economic loss greater than 50% and it cannot have more than 10 employees.

The coverage period for emergency EIDL advances is through Dec. 31, 2021.

Economic Injury Disaster Loan eligibility

Wondering what the Economic Injury Disaster Loan eligibility is? Here’s more insight…

Any business, cooperative, or Employee Stock Ownership Plan with 500 or fewer employees and all sole proprietors, independent contractors, and private non-profits could apply to obtain this Small Business Administration loan.

(Some businesses with 500 or more employees may qualify. Refer to the SBA Table of Size Standards to see if your industry qualifies with a higher amount of employees.)

To be eligible for EIDL assistance, your small business must also have:

  • Sustained economic injury
  • Located in a disaster-declared area

What are approved Economic Injury Disaster Loan uses?

You can use the EIDL for:

  • Paid sick leave for employees
  • Maintaining payroll
  • Covering the increased cost of materials due to supply chain limitations
  • Rent or mortgage payments
  • Repaying unmet obligations due to revenue loss
  • All otherwise deductible expenses

Benefits of the Economic Injury Disaster Loan Advance

The EIDL program has many benefits for small business owners. Here are some specific details related to the Economic Injury Disaster Loan:

  • Borrowers don’t have to give a personal guarantee for loans under $200,000
  • Borrowers can request an advance of up to $10,000 to get paid out in three days
  • Businesses can borrow up to $2 million (for a COVID-19 EIDL, up to 6 months of working capital)
  • The advance amount is determined by number of employees at $1,000 each
  • The SBA does not charge upfront loan fees or payment penalties for the advance

What is the deferment period of the Economic Injury Disaster Loan?

Economic Injury Disaster Loans made in 2020 have an extended due date. The due date is 12 to 24 months from the date of the note. Loans made in 2021 have a first payment due date extended from 12 to 18 months from the date of the note.

Economic Injury Disaster Loan application

Looking for the Economic Injury Disaster Loan application details? Qualifying U.S. businesses can apply online at the SBA’s Disaster Loan Assistance website. For personalized loan application assistance, you can:

Tax treatment of targeted EIDLs

If you already received a targeted EIDL advance from the government and you’re wondering how EIDLs are taxed, here is some additional information:

  • Amounts received from a targeted EIDL Advance isn’t included in gross income.
  • Deductible expenses paid with funds from this program are
  • Amounts that are excluded from gross income from this program by a partnership or S corporation are tax exempt to partners and S corporation shareholders.
  • Partner’s and S corporation shareholder’s tax basis is not reduced from amounts excluded from gross income.

Can an SBA disaster loan be forgiven?

If small business owners take out a loan, they often wonder if it’s forgiven. The Economic Injury Disaster Loan forgiveness only applies to the “advance” portion of the loan. Applicants who were able to receive the advance before it was suspended and after it was extended will not be required to repay the advance provided, even if they’re subsequently denied a loan.

Tax filing note: Even if your Economic Injury Disaster Advance is forgiven, you will be able to deduct otherwise deductible expenses paid with this loan.

When do you receive the EIDL Advance?

Business owners who applied for the extended EIDL advance should have received it within 21 days if their application was successful. This is a change from the earlier approval and disbursement time frame of three days.

More help with small business taxes

We know there’s a lot of uncertainty for you and your business during this time. Your business tax and accounting needs don’t have to be one of them. For hands-on guidance with small business tax needs, get help.

Rely on our team of certified small business tax pros to get your taxes right and keep your business on track. Make an appointment.

Looking for more updates about the latest small business stimulus relief? Check out our Guide to 2020 small business tax and stimulus relief for details.


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