Economic Injury Disaster Loan (“EIDL”) Program: Answers
Economic Injury Disaster Loan (“EIDL”) Program: Answers
by Justin Tisdale on May 30
The CARES Act expanded the SBA’s existing EIDL program. An EIDL loan provides longer-term loans with beneficial terms. Companies in all 50-states and most US territories are eligible for EIDLs due to economic injury related to the COVID-19 pandemic.
The EIDL program is designed to help businesses stay afloat during the declared disaster. The intention of the program is to give a business the ability to quickly “restart” once the disaster is over. Any proceeds received should not be viewed as cheap or free money. Yes, an EIDL comes with very appealing terms but the program is very clear in that EIDL proceeds may only be used for normal business expenses that could have been paid had the disaster not occurred. EIDL funds cannot be used to expand or improve the business or to refinance existing debt. A good rule of thumb is to use EIDL proceeds for normal working capital expenditures.
Perhaps. If the business has a demonstrated history of using credit cards as part of it’s bill paying system and those credit card charges are for valid business purposes (except any expansion, improvement costs) then a portion of the EIDL proceeds may be used to pay such credit card bills.
Collateral is only required for loans in excess of $25,000. Loan collateral includes tangible and intangible business property.
The full principal balance of the EIDL could become immediately payable.
For more information, please see sba.gov.