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What You Should Know About the Economic Injury Disaster Loan

Before you apply for an Economic Injury Disaster Loan, take the time to review recent changes to the program.

The pandemic has severely affected the economic structure of small businesses across the United States. Small businesses are under financial pressure due to loss of revenue, increased operating costs, and economic recession.

The Small Business Administration’s (SBA’s) Economic Injury Disaster Loan (EIDL) program has provided funds to organizations during federally recognized disasters for the majority of its history. Their COVID relief options strengthened the popularity of EIDL grants in 2021 as a second vehicle, alongside the Paycheck Protection Program (PPP), to provide small firms with access to needed finance to continue operations.

If you’re looking for financial assistance for your small business to survive the pandemic, the Economic Injury Disaster Loan might be the solution you need.

Here’s what you’ll learn:

  • How the COVID EIDL can help your small business
  • Enhancements to the EIDL program in 2021
  • Final thoughts from loan specialists

The Economic Injury Disaster Loan As An Aid To Small Businesses

Small companies and nonprofit organizations around the country are still seeking financial aid to deal with COVID-related challenges more than a year after the pandemic began. If you have limited financial resources to continue operating in the midst of this crisis, the pandemic-modified 2021 EIDL grant could be your best option.

The Economic Injury Disaster Loan was developed in 2020 to assist millions of small businesses still impacted by the pandemic. The program’s goal is to ensure that vulnerable sectors receive the funding they require to reopen, recover, and rebuild.

While PPP funding provides opportunity for many small companies and organizations, it is mainly intended to cover payroll costs and a limited number of operating expenses. In contrast, the COVID EIDL funds can be utilized for practically all working capital needs.

Small business owners within US territories are eligible to apply. To learn if the Economic Injury Disaster Loan is right for you, there are changes to the program that you should know.

SBA offers up to $2 million economic relief to small businesses under the 2021 EIDL grant.

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Key Changes To The Economic Injury Disaster Loan Program

COVID policy modifications around the EIDL grant went into effect on Sept. 8, 2021.

Changes to the COVID EIDL program will provide larger and more flexible support to more businesses. Furthermore, these improvements will assist entrepreneurs in acquiring access to finance at a time when small business owners report having less than three months of financial reserves.

Let’s take a look at how the program works right now.

1. Increased Loan Maximum

Following a prior limit of $500,000, the SBA announced a new maximum loan amount of $2 million, beginning September 6. Loan funds can be used for normal standard running expenses and working capital, such as wages, equipment purchases, and debt repayment.

The SBA has declared that the last day for granting applications is Dec. 31, 2021, so interested businesses should file as soon as possible to provide time for processing and approval.

Businesses can apply for COVID disaster loans regardless of whether they have incurred property damage, and the money can be used to help meet working capital needs and pay operating expenses while they recover from the pandemic’s impact.

2. Establishment of a Deferred Payment Period

The SBA will ensure that small business owners do not have to begin EIDL repayment until two years after loan origination, allowing them to weather the pandemic without worrying about making ends meet.

3. Expanded Use of Funds

The Economic Injury Disaster Loan funds can be used as working capital as well as to make regular payments for running expenses — wages, rent/mortgage, utilities, and other typical business costs. COVID EIDL funds can also be used to prepay commercial debt and federal business debt.

However, these funds can’t be used to expand the business, start a new one, or pay for expenses already covered by a PPP loan.

4. Updated Loan Terms

The terms for COVID EIDL have been made affordable. The interest rate for small businesses is 3.75%, and 2.75% for private nonprofit organizations. 

During the deferment period, interest continues to accrue, and borrowers may opt to make full or partial payments.

5. Simplified Application Process

The SBA has simplified the affiliation requirements to make it easier for small firms to apply for COVID Economic Injury Disaster Loans. Currently, the initial application process can be completed online

These are some of the approval conditions for the 2021 EIDL grant:

  • Loans of up to $25,000 are not subject to collateral or a personal guarantee.
  • Loans in excess of $25,000 demand collateral.
  • Loans in excess of $200,000 demand collateral as well as a personal guarantee.

For a simplified application process, eligible business owners can apply for the Economic Injury Disaster Loan online.

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Final Thoughts: 2021 EIDL Grant — What You Need To Know

Paying additional debt is not easy. It is critical to consider all of your options and assess whether the individual loan limitations, reporting requirements, and relationships with other funding sources are appropriate for your case.

Here at Today CFO, we provide financial services for a detailed review of all types of loan agreements. We can help you in understanding the terms of the Economic Injury Disaster Loan, its collateral requirements, cost of capital, internal rate of return, pay-back strategies, and restrictions brought by the loan to your business.  Our expertise in government assistance programs will determine whether an EIDL would be beneficial or detrimental to your company. 


For questions about EIDL eligibility and application requirements, visit www.sba.gov/eidl. Or even better, contact us to receive an answer addressing your specific business needs.