The U.S. federal government is still eager to help small businesses and nonprofits through rough financial times during the pandemic. But this time, help is in the form of an “unforgivable loan.”

The U.S. Small Business Administration (SBA) has reopened the Economic Injury Disaster Loan. The SBA has scheduled small business relief and recovery webinars for small business owners to learn more about the program.

While also run by the SBA, the Economic Injury Disaster Loan (EIDL) is not identical to the Paycheck Protection Program (PPP). The PPP helped select businesses, self-employed workers, proprietors and certain nonprofit organizations that continued to pay their workers.

EIDL is designed to help hard-hit small businesses and nonprofits recover from the economic downturn of the pandemic by providing advances and low-interest disaster loans.

Two of the biggest differences between PPP and EIDL are the way in which funds were to be spent and loan structure. PPP loans were partially or fully forgiven for businesses that maintained the number of employees on their payroll and kept employee wages stable during the pandemic. PPP funds were also earmarked to cover payroll costs, rent, interest and utilities.

The government launched a streamlined portal for borrowers of PPP loans of $150,000 or less to apply for forgiveness directly through the SBA.

In contrast, EIDL is an unforgivable loan. EIDL is offering borrower-friendly interest rates of 3.75% for businesses and 2.75% for nonprofits, and is payable over 30 years. For example, a $10,000 loan over 30 years would have a $46 monthly payment. Also, EIDL is more flexible in use of its funds, allowing small business owners to meet immediate needs such as making debt payments on debt accrued before or during the pandemic.

Business/Nonprofit Parameters

EIDL is defining a small business as having 500 or fewer employees. The business needs to have a credit score of least 570, and have evidence of being in business or invested in launching a business by January 2020. Required documents will involve federal tax forms, usually from 2019, or business financial statements plus IRS form 4506-T.

The application deadline for EIDL is December 31, 2021.

Business owners with green cards may qualify. Individuals with DACA status are not eligible.

EIDL Evolved from OCA

The EIDL transitioned from the Office of Disaster Assistance to the Office of Capital Access (OCA) at the end of June 2021. OCA implemented new processes and performance management.

The SBA went from daily processing of loan increases of 1,647 on June 28 to 20,169 on July 21, 2021 – a 12-fold increase in efficiency. As a result, a single loan officer went from processing 1.86 applications per day to currently 15 applications per day.

For more information about SBA programs and services, or to apply for a COVID EIDL loan, visit www.sba.gov.

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