Small Business Administration (SBA) Reopens its Economic Injury Disaster Loan (EIDL) and EIDL Advance Programs to All Eligible Applicants

On June 15, 2020, the U.S. Small Business Administration (SBA) announced that it had reopened its Economic Injury Disaster Loan (EIDL) and EIDL Advance program portal to all eligible applicants.  Over the previous month, the EIDL portal had been accepting applications only from certain agricultural businesses that had initially been ineligible to participate in the EIDL programs.

Unlike SBA’s Paycheck Protection Program (PPP), which currently has a June 30, 2020 loan approval deadline, eligible borrowers may apply to the EIDL programs through December 31, 2020. According to SBA, EIDL applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.

Unlike PPP loans, which are eligible for partial or complete forgiveness depending on numerous factors, loans under the EIDL program are generally not forgivable.  However, any EIDL “advance” will not need to be repaid. Recipients do not need to be approved for a loan in order to receive an EIDL advance, but the amount of the advance will be deducted from the borrower’s total loan eligibility, if approved.

While not forgivable, EIDLs may be attractive to some borrowers due to their broader permitted uses (compared to PPP loans) and their relatively longer maturity (up to 30 years) and low interest rates (3.75% for businesses and 2.75% for non-profits).  Payments on loans under the EIDL program are also subject to one year of deferment.  EIDLs less than $200,000 can be approved without a personal guarantee, and SBA does not take a security interest in any collateral for loans less than $25,000.

Potential EIDL borrowers should consult with counsel before submitting their loan applications, particularly if the borrower has also received (or plans to apply for) a PPP loan or if the EIDL loan amount is large enough to require a personal guarantee or collateral to secure the loan.  While SBA’s loan programs can serve as an important lifeline for small businesses, they also come with important terms, conditions and limitations that borrowers should be aware of before utilizing the programs.