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Economic Injury Disaster Loans (EIDL) for Small Businesses

Close up of a woman going over paperwork at a table with a cup of coffee by her hand

As a small business owner experiencing a loss of revenue from the novel coronavirus (COVID-19) pandemic, you’re probably losing sleep at night wondering how your business will survive in these uncertain times. The mental narrative playing on repeat in your head may sound something like this:

“Coronavirus is crushing my business! How will I serve my customers? Am I going to lose even more of them? And my employees… will I have to lay them off? I’m not sure I can afford my next payroll. What about my bills and debt payments? I could lose my business! ” 

These concerns are enough to make anyone feel worried and anxious. Fortunately, disaster loans are available to help businesses weather the pandemic’s impact. 

What are Disaster Loans?

Note: the following information was sourced from the SBA’s website and was updated on July 21, 2o2o.

Disaster loans help businesses recover from physical and economic damages caused by a disaster such as a hurricane, flood, or in these times, COVID-19. 

The Small Business Administration (SBA) provides Economic Injury Disaster Loans (EIDL) to businesses and non-profit organizations suffering losses from COVID-19. These loans provide essential cash to help keep your business afloat. The funds from disaster loans can be used to pay your employees, vendors, and creditors. 

The SBA’s economic injury disaster loans provide emergency funding for business owners and have favorable terms including low interest rates and long payback periods. The interest rate for disaster loans is 3.75% for small businesses and 2.75% for private non-profit organizations. The length of the loan payback period will vary based on your ability to repay it, and can be as long as 30 years. 

Which Businesses are Eligible?

Small business owners in all U.S. states and territories are currently eligible to apply, provided that your business meets the SBA’s size standards. In general, to be considered a small business, you must not have more than 500 employees, but there are exceptions. Use the SBA’s Size Standards Tool to find out whether your business qualifies. 

SBA Disaster Loan Process

How to Apply for a Disaster Loan

You can apply for an SBA disaster loan online, by mail, in person at a disaster center, or by calling the SBA Customer Service Center at 1-800-659-2955.  The SBA recently introduced a streamlined application process.  Click here to access the application. 

Be sure to have your financial statements on hand before you apply. Among other things, you’ll be asked for information about your revenue and cost of goods sold, for the twelve months prior to the date of the disaster. The SBA defined January 31, 2020 as the disaster date. 

What Happens Next? 

After you submit your loan application, an SBA loan officer will review your credit, verify your eligibility, and approve or deny your loan application. If your application is approved, congratulations! It’s time to move on to the loan closing process and receive funding. 

You’ll receive an e-mail from the SBA that directs you to log into their website. There, you’ll have an opportunity to decide if you want to receive all or only some of the total loan amount that was approved.

What Else Should I Do?

Regardless of whether you’re approved for a disaster loan, there are other things you can do to mitigate the impact of COVID-19. 

  • Maintaining a cash forecast  that predicts your business’s future inflows and outflows of cash is vital to the health of your business.  By looking ahead, you’ll eliminate the much of the uncertainty and anxiety about what your business can afford in future. Check out our previous article for more tips on cash flow
  • You should also reduce or eliminate all non-essential expenses. If you’re running out of cash and have a line of credit, now is the time to draw funds from it. 
  • Consider seeking professional financial guidance to help you through this challenging time. While it may seem like one more expense you can’t afford, professional help may save your business from permanent closure. An experienced CFO will ensure that today’s problems don’t snowball into bigger ones down the road. If you need assistance coping with the financial fallout of COVID-19, engage a CFO today.  

About Momentum CFO

Momentum CFO is a boutique firm specializing in outsourced Chief Financial Officer services for small to mid-size businesses. We help business owners increase profit, improve cash flow, plan, and make smart financial decisions. Enjoy the benefits of Fortune 500 financial expertise without the expense of hiring a full-time CFO.