Finances and Taxes

A Step-by-Step Guide to Applying for an Economic Injury Disaster Loan

Andi Smiles Small business financial consultant 
How to Apply for an SBA Economic Injury Disaster Loan _ Gusto

Update as of July 14, 9:45 am, PT: The Economic Injury Disaster Loan (EIDL) Advance Program, which provided up to $10,000 in cash grants to borrowers, has expired.

However, the EIDL program is still accepting applications for loans up to $150,000. Apply here. 

During times of need, the Small Business Administration (SBA) provides disaster loans, which are low-interest loans available to small businesses that have been impacted by crises like the coronavirus pandemic. The most common type of disaster loan for businesses affected by COVID-19 is the Economic Injury Disaster Loan (EIDL).

What is an Economic Injury Disaster Loan (EIDL)?

An EIDL is for businesses that don’t have any physical damage from COVID-19 but have experienced financial losses. The CARES Act modified the EIDL, making it easier for small businesses to qualify and adding an emergency $10,000 cash advance (more on that later). 

The loan gives up to $150,000 in aid to businesses, but the actual amount you can borrow is based on “economic injury,” or in other words, the economic losses you’ve sustained. Funds can be used as working capital to pay bills and to pay fixed debts, payroll, and accounts payable. The money can’t be used to replace lost sales, expand your business, or to pay down long-term debt. 

You cannot use the loan to pay:

  • Dividends and bonuses
  • Disbursements to owners (unless for the performance of services)
  • Repayment of stockholder/principal loans
  • Expansion of facilities or purchasing fixed assets
  • Paying off debt owned by a Federal agency or SBA
  • Paying any direct Federal debt, except IRS obligations
  • Refinancing long-term debts
  • Relocation

Currently, the interest rate for an Economic Injury loan is 3.75% for small businesses and 2.75% for nonprofit organizations. Repayment terms vary based on the borrower’s ability to repay the loan, and the maximum repayment term is 30 years. 

Who is eligible for an SBA disaster loan?

To be eligible for any SBA loan, you must meet the SBA’s requirement of a small business, which means you have 500 employees or fewer. There are some exceptions for specific industries. You can check if your business qualifies using the Size Standards Tool from the SBA. 

Small businesses of any size (and entity type—that includes sole proprietors) are eligible for an EIDL, as long as your business is located in a declared disaster area. You can check an up-to-date list of COVID-19 declared disaster areas here. As of this writing, all 50 states have become eligible for disaster assistance.

There are a few other things you should know about loan eligibility:

  • Credit score: The SBA will perform a credit check when you apply. The SBA doesn’t give any guidelines on what your credit score must be, other than “acceptable to SBA.” Vague, we know. The good news is that if you don’t have good business credit, the SBA will consider other factors, like your history of on-time rent, utilities, insurance, and other bill payments. 
  • Collateral: For the EIDL loans under $200,000, no personal guarantee or collateral is required.
  • Access to other credit: Under the CARES Act, you don’t have to prove that you don’t have access to credit elsewhere to qualify for the loan. 
  • Other SBA loans: If you have outstanding SBA loans, you can still apply for a disaster loan. The SBA encourages lenders of outstanding SBA loans to defer payments for up to 12 months for borrowers in declared disaster areas. Reach out to your lender to see if you’re eligible for a deferment. If you already have an SBA disaster loan, the SBA offers an automatic deferment. 

How do I get the EIDL $10,000 emergency cash advance?

Note: As of July 11, 2020, the SBA is no longer issuing EIDL advances. The Administration stated in a release:

“Having allocated the full $20 billion that was appropriated by Congress, SBA will discontinue making EIDL Advances to new applicants. By law, the SBA is not permitted to issue new EIDL Advances once all program funding has been obligated.”

Under the CARES Act, businesses that apply for an EIDL can request to be considered for an emergency cash advance of up to $10,000.

The advance is intended to provide immediate relief to small businesses that are experiencing a temporary loss of revenue. There’s no qualification to request the advance; any business eligible for the EIDL program can request the advance when prompted during the application process (see Page 4: Additional Information).

You’ll be paid your advance within three days of submitting your EIDL application, and you won’t need to repay the sum if you’re denied a loan.

This cash advance is included in the total loan amount you receive. For example, say you are awarded an EIDL loan of $100,000, and you also qualify for the $10,000 advance. After you’ve received the advance, you will get the remaining $90,000 if your loan is approved—not an additional $100,000.

The emergency cash advance can also be forgiven, but only if you spend the money on:

  • Maintaining payroll, including paid leave
  • Rent and mortgage payments
  • Increased cost of materials or supplies
  • Paying other obligations that can’t be met due to revenue loss  

Note that if you qualify for forgiveness for the cash advance, this will reduce the amount you can be forgiven for a Paycheck Protection Program loan by the same amount.

How to apply for an EIDL

You can apply for an SBA disaster loan online, in person at a Disaster Recovery Center, or by mail. The online application is the fastest way to receive a decision about your loan, so we definitely urge you to apply online. 

Here’s what information you’ll need to apply for the loan:

  • Business’s legal name, trade name, and tax identification number
  • Total gross revenue from February 1, 2019 through January 30, 2020
  • Total cost of goods sold from February 1, 2019 through January 30, 2020
  • Total amount of lost rents due to COVID-19 (for rental and commercial property owners only)
  • Total nonprofit operational costs from February 1, 2019 through January 30, 2020 (for nonprofits only)
  • For each owner you’ll need to know their:
    • Legal name
    • Title
    • Ownership percentage of the company
    • Social security number
    • Date of birth
    • Place of birth
    • Residential street address
  • Your bank name, account number, and routing number

To apply online:

Go to this website to start the online application. The SBA estimates that the online application will take two hours and 10 minutes to complete, so be sure to give yourself plenty of time. 

Pro tip: If you press the back button during the application process, your information will not be saved and you’ll be forced to start the application over again. If you make an error, wait until the Summary page to fix it. That’s where you can edit your application without losing your work. 

Page 1: Disclosures

Eligible entity verification: To be eligible for the loan you must meet one of the following criteria. In your application you’ll select the option that applies to you. 

EIDL_ Elibigility Verification
  • Applicant is a business with not more than 500 employees. If you have less than 500 employees and are not a sole proprietor or independent contractor, you’ll select this option. 
  • Applicant is an individual who operates under a sole proprietorship, with or without employees, or as an independent contractor. Even if you have employees, if you’re a sole proprietor or independent contractor, you’ll select this option. If you report your business income and losses using the Schedule C, you’ll select this option. 
  • Applicant is a cooperative with not more than 500 employees.
  • Applicant is an Employee Stock Ownership Plan (ESOP), as defined in 15 U.S.C. 632, with not more than 500 employees.
  • Applicant is a tribal small business concern, as described in 15 U.S.C. 657a(b)(2)(C), with not more than 500 employees.
  • Applicant is a business, including an agricultural cooperative, aquaculture enterprise, nursery, or producer cooperative, that is small under SBA Size Standards.
  • Applicant is a business with more than 500 employees that is small under SBA Size Standards. If you have more than 500 employees but think your business still qualifies as small under the SBA standard, you can use the SBA Size Standard Tool to determine your eligibility. If you’re eligible, choose this option.
  • Applicant is a private nonprofit organization that is a non-governmental agency or entity that currently has an effective ruling letter from the IRS granting tax exemption under sections 501(c), (d), or (e). 

Review and agree to the conditions: Next, you must check to agree to all of the conditions of the loan. If you’re unable to check one of the boxes, you’re not eligible for the loan. 

EIDL_ Loan conditions

Page 2: Business Information

Business Information_ 1

Business legal name: Enter the legal name of your business. Be sure to enter the same name that you use on tax documents, not your trade name or DBA name. 

Trade name: If you use a name different from your business’ legal name, enter it here. If your trade name is the same as your business legal name, enter your business legal name. 

EIN or SSN for Sole Proprietorship: If you’re a sole proprietor, put your social security number here. If you’re not a sole proprietor, put your federal employer identification number

Organization type: From the dropdown list, select your organization type. 

Business Information_ 2

Is the Applicant a Nonprofit Organization? If you’re a nonprofit, check Yes. If you’re not a nonprofit, select No. 

Is the Applicant a Franchise? If you’re a franchise, check Yes. If you’re not a franchise, check No. 

Gross Revenues for the Twelve(12) Month Prior to the Date of the Disaster: The SBA has officially declared COVID-19 a disaster as of January 31, 2020. On this line, you’ll enter your gross revenue from February 1, 2019 through January 30, 2020. Your gross revenue is everything you earn before subtracting costs of goods sold and operating expenses. 

Keep in mind that your 2019 tax return reports your gross revenue from January 1, 2019 through December 31, 2019, and you cannot use those figures here. Instead, you’ll need to generate a profit and loss report for the period of February 1, 2019 through January 30, 2020.

Cost of Goods Sold for the Twelve(12) Month Prior to the Date of the Disaster: Put your total cost of goods sold from February 1, 2019 through January 30, 2020. Cost of goods sold includes inventory that you purchase to resell, as well as raw materials and outsourced labor for goods that you produce. If you don’t have cost of goods sold, enter zero. 

Business Information_ 3

Rental Properties (Residential and Commercial) Only – Lost Rents Due to the Disaster: If you don’t have rental property you can skip this question. If you do have rental property, put the total amount of rent that you’ve lost as a result of COVID-19. 

Nonprofit Cost of Operation for the Twelve(12) Month Prior to the Date of the Disaster: If you’re a nonprofit, put your total operational costs from February 1, 2019 through January 30, 2020. You can find this number on your profit and loss report. 

If your entity is not faith-based, skip the next two line items.

Combined Annual Operating Expenses for the Twelve(12) Months Prior to the Date of the Disaster (January 31, 2020) for All Secular Social Services Provided by the Faith Based Entity: If you’re a faith-based entity, put your total operating expenses for secular social services from February 1, 2019 through January 30, 2020.

List the Secular Social Services Provided by the Faith Based Entity: List the secular social services that you provide. These are the services that were funded by the operating costs you listed on the previous line. 

Business Information_ 4

Compensation From Other Sources Received as a Result of the Disaster: If you received COVID-19 disaster relief assistance elsewhere, like through other loans, grants or business interruption insurance, put the total amount that you received. 

Provide Brief Description of Other Compensation Sources: Describe who gave you additional assistance and the type of funding (for example, another loan or insurance payment) you received. 

Business Information_ 5

Business contact information: Enter your business address, phone number, and email address. 

Business Information_ 6

Date Business Established: This is the date your business was started. If you’re an S corp, C corp, or partnership, this information will be on your business’s tax return. Alternately, you can find this date on your Security of State’s website by searching your business’s information. 

Current Ownership Since: If you’ve always been the owner, this date will be the same as the date your business was established. If there was a previous owner, you’ll enter the date that you took ownership of the business.

Business Information_ 7

Business Activity: Select the activity that best describes what your business does from the dropdown list. 

Detailed Business Activity: Choose the activity that best describes what your business does. This list changes based on what you selected under Business Activity. If you don’t see an option close to what you do, try selecting a different category under Business Activity. 

Number of Employees (As of January 31, 2020): List the number of employees you had as of January 31, 2020. If you’re an employee of your business (like if you’re an S corp or C corp), include yourself in this number. If you’re a sole proprietor and don’t have any employees, put zero. 

Page 3: Business Owner’s Information

Is Your Business Owned by a Business Entity?: If your business is owned by another business, check Yes. If you are the owner of your business, check No. 

Individual Owner/Agent(s)

Business Owner's Information_ 1

Owner/Agent 1: This is where you’ll enter your personal information. Under Ownership Percentage put 100 if you’re the sole owner of the business. If there are multiple owners, put the percentage of the business you own. 

If you’re the only owner of your business, press next. If your business is owned by more than one person, click the Add Additional Owner button and continue entering the personal information of the owners. 

Business Owner's Information_ 2

Page 4: Additional Information

Additional Information_ 1

Answer the first three questions by checking Yes or No. The questions you’ll be asked are:

  1. In the past year, has the business or a listed owner been convicted of a criminal offense committed during and in connection with a riot or civil disorder or other declared disaster, or ever been engaged in the production or distribution of any product or service that has been determined to be obscene by a court of competent jurisdiction?
  2. Is the applicant or any listed owner currently suspended or debarred from contracting with the Federal government or receiving Federal grants or loans?
  3. Lastly:
    1. Are you presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction?
    2. Have you been arrested in the past six months for any criminal offense?
    3. For any criminal offense—other than a minor vehicle violation—have you ever been convicted, plead guilty, plead nolo contendere, been placed on pretrial diversion, or been placed on any form of parole or probation (including probation before judgment)?

If anyone assisted you in completing this application, whether you pay a fee for this service or not, that person must enter their information below: If someone helped you with the application, whether you hired them or not, you must enter their contact information here. Check Yes if you give the SBA permission to talk to this person about your application. Check No if you do not. 

Additional Information_ 2

I would like to be considered for an advance of up to $10,000: Check this button if you’re requesting an emergency $10,000 cash advance. Remember, this advance can be forgiven if you use the money for maintaining payroll, rent and mortgage payments, the increased cost of materials or supplies, or paying other obligations that can’t be met due to revenue loss. Again, while this qualification applies for forgiveness, there isn’t a qualification for the actual advance.

Additional Information_ 3

Where to send funds

Additional Information_ 4

Bank Name: Enter the name of your bank.

Account Number: Enter the account number of the account where you’d like the funds to be deposited. 

Routing Number: Enter your bank’s routing number. 

Additional Information_ 5

I hereby certify UNDER PENALTY OF PERJURY UNDER THE LAWS OF THE UNITED STATES that the above is true and correct: Carefully read the declarations above. If you agree to the declarations check the box. 

Page 5: Summary

The final page of the application is the summary of your application. Review the details and make sure that you entered all your information correctly. An error could result in your loan application being delayed or denied, so you definitely want to take the time to review your application. 

If you need to make changes, click on the Edit button. 

Once you’re happy with the application, check the I’m Not a Robot button and press Submit. 

What happens after you apply?

Traditionally, the SBA disaster loan application is a three-step process. 

Step 1 is to apply for the loan by completing the online application. Under the CARES Act, the SBA loan process has been streamlined, and EIDLs can be approved by the SBA just based on credit score alone. 

Still, it’s helpful to know how the traditional loan process works, in case your loan requires additional processing time. 

Step 2 is when your loan processing decision is made. Here’s what happens:

  • SBA reviews your credit.
  • SBA verifier estimates the total property damage or economic loss to your business.
  • An SBA loan officer determines your eligibility for the loan.
  • A loan officer works with you to provide any necessary information needed to approve or deny the loan. The SBA states that its goal is to make a decision about an application within two to three weeks. But this could be longer with an increased volume of applicants.
  • A loan office contacts you with loan recommendations and next steps. You’ll also receive information about your loan decision in writing. 

During Step 2, it’s likely that your loan processor will request the following information:

  • SBA Loan Application (SBA Form 5 or 5C)
  • Personal Financial Statement (SBA Form 413)
  • Schedule of Liabilities (SBA Form 2202)
  • Tax Information Authorization (IRS Form 4506T) 

Step 3 is when your loan closes and funds are distributed to you. Here’s what happens:

  • SBA sends you Loan Closing Documents for you to sign.
  • After you sign the documents, an initial disbursement is made within five days. For an EIDL, the initial payment is $25,000. 
  • A case manager is assigned to you and will help you meet the loan conditions. They will also schedule future disbursements until the entire loan amount is paid. 
  • If your circumstances change and you need to increase or decrease your loan, you can make adjustments after the closing date. 

Timing

Here’s how long each step traditionally takes. Keep in mind that the lead times could be longer with an increased number of applicants:

StepWhat HappensTurn Around Time
1Business owner applies for the loanTwo hours to complete the online application
2SBA makes loan processing decision2-3 weeks
3Loan closed and funds distributedWithin 5 days after signing the Loan Closing Documents

Best practices for applying

Here are some tips to ensure that your application is processed as quickly as possible:

  • Apply online. The SBA states that the fastest way to have your application processed is by applying online.
  • Triple check that the information on your application is correct. Incomplete applications will not be accepted, which means that you’ll experience delays processing your loan. 
  • Make sure your numbers are up to date. Before you fill out your application, update your bookkeeping to ensure the numbers you provide are accurate. If a loan officer requests additional documentation, you may need things like a year-to-date profit and loss report and monthly sales figures. Since you only have seven days to comply with additional requests, it’s best to have your numbers current. 

An SBA disaster loan can be a much-needed lifeline for businesses impacted by the COVID-19 pandemic. If you’re looking for more relief resources, here’s a comprehensive list of public and private loans, grants, and financial support programs aimed at small businesses.

Our COVID-19 Small Business Resource Hub has legislation updates, advice, and support.

Updated: July 14, 2020

Andi Smiles
Andi Smiles Andi is a small business financial consultant and coach who teaches business owners to take control of their finances. She’s helped hundreds of self-employed folx organize and understand their business finances, while also uncovering their emotional relationship with money.

Comments

  • ann

    how to answer the ownership question if the applicant LLC is owned by 3 LLCs with each a 33.33% stake?

    Reply
    • Gusto Editors

      Hi Ann — currently, the EIDL guidance doesn’t prohibit owners that are not individuals from using the EIDL. In your application, you’ll just want to provide your entities’ details.

      Reply
    • Matt

      What eligibility entity is used for landlords? The sole proprietorship one or the employees under 500?
      Also what would be entered under business name and trade name if you don’t have a DBA, LLC, etc? Are those Types of rental property Landlords still eligible?

      Reply
      • Gusto Editors

        Hi Matt — according to Zuby App, it appears that if you own your properties under your name without an LLC, you will apply as an “individual who operates under a sole proprietorship,” and you may want to consider putting your personal name down: https://medium.com/zubyapp/landlords-are-eligible-for-financial-relief-from-sba-b8fd111d8ddb Note that this is not to be construed as legal advice and that you will want to connect with a rental industry CPA or tax advisor for specific guidance.

        Reply
  • Sherry

    Hello, I would like to know if I can apply for the EIDL grant, if I took a loss in my business in 2019? Thank you for your help!

    Reply
  • Shonie Schlotzhauer

    From the SBA’s website, it looks to me like they are NOT accepting coronavirus-related EIDL applications at this time, but is processing ones already in the queue first-come first-served. Any further information about this? Or ideas about whether this loan program will become available again??

    Reply
    • Gusto Editors

      Hi Shonie — we currently don’t have any current guidance beyond what the SBA website says. We’ll be sure to update this article once we know further!

      Reply
  • CHARLES TAYLOR

    I applied online (sba.gov) for the eidl emergency funds early April. Expected a response, but no letter no email. We’re a start up operating two months before the disaster hit with 5 employees on payroll. Lost contracts, etc.

    Reply
  • Anonymous

    So if you pre-apply for the EIDL as a sole proprietor and receive $1000 grant in advance, do you get to keep that money even if you decide not to proceed with the loan? And do you still have to submit business/financial documentation.

    Reply
  • Mojde Bahremand

    As an owner of business with S-corporation, with only one employee ( myself) can I use EIDL loan by distribution? And if not, would you please explain to me this part as exception ?(Disbursements to owners (unless for the performance of services)
    What does that mean?

    Reply
    • Gusto Editors

      Hi Mojde — we recommend consulting a CPA or tax advisor for guidance for specific situations.

      Reply
  • Renee

    If I received the EIDL advance, do I have to apply for the loan. I’d prefer not to as it’s been many weeks and my circumstances have changed.

    Reply
  • christine

    I have more than one business can I apply for each one all have eins

    Reply
    • Gusto Editors

      Hi Christine — there is currently no official guidance on applying for EIDL loans for multiple businesses, but it appears that the loan applications will be processed separately by the SBA.

      Reply
  • Ellie

    If the business started in mid to late 2019 can we still apply?

    Reply
    • Gusto Editors

      Hi Ellie — businesses who’ve been operation since January 31, 2020 (when the public health crisis was announced) or before should be eligible to apply.

      Reply
  • Zack Santoro

    We are a 501(c)(3) not for profit corporation, so we don’t have either owners or stockholders, so how do we fill out the (required) owner information page of the online EIDL application? Listing our Head of School doesn’t seem appropriate, nor does listing all the members of our Board of Trustees.

    Reply
    • Gusto Editors

      Hi Zack! Nonprofits applying for the EIDL program should insert “N/A” or “None – 501(c)3 Charity” in response to the question about “Applicant Ownership,” since nonprofit organizations do not have owners. The application should be signed by an authorized corporate officer.

      Reply
  • Sandy

    I am a event planner and I have a question about EIDL loan. I wanted to know if I am eligible for this loan even though I never used my business on my taxes since my event planning is more of a side job.

    Reply
    • Gusto Editors

      Hi Sandy! In its EIDL application, the SBA provides an “eligible entity verification,” which will help you determine if you are eligible. https://covid19relief.sba.gov/#/ If you have further questions, you can contact the SBA’s Customer Service Center at 1-800-659-2955 or email DisasterCustomerService@sba.gov.

      Reply
  • Rendell

    This article is helpful, i was in a position last year where i had bad credits and needed loans for my olive business. I was getting terrible rates so i pulled out, got a professional (you can reach him at (ghostpetru) on Wickr app) who helped work on my credit score and records. Now i have applied for the SBA loan, i got my grant early last month but i still have not received my loan.

    Reply

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