What is a financial loss disaster loan? That’s a question small businesses have been asking themselves because of the COVID-19 pandemic. We will provide an overview of an EIDL loan and highlight some of the benefits it offers. If you’re thinking about applying for one, read on. We’ll discuss who’s eligible, what it can be used for, and more. Let’s get started!
What is an Economic Disaster Loan (EIDL)?
EIDL assistance is available in the form of an Economic Disaster Loan (EIDL) and EIDL Advance. EIDLs are working capital loans that can provide up to $2 million to small businesses and nonprofits to help alleviate the financial impacts of a disaster.
The EIDL program is primarily designed to help businesses recover from the short-term effects of a disaster, such as significant economic injury or property damage. EIDLs are administered by the Small Business Administration (SBA) and are subject to credit approval.
How does an EIDL loan work?
The disaster assistance loan amount is based on the applicant’s financial obligations, which include accounts payable, inventory and other debts that cannot be paid as a result of the disaster. Terms are based on the applicant’s ability to repay the disaster loan.
There are several benefits to an EIDL loan, including having a lower interest rate than many other types of loans, no guarantee is required, itThe loan can be repaid over a longer period than many other types of loans.
Who is eligible?
Declared disaster assistance is available to small businesses, small farming cooperatives, small aquaculture businesses, and most private nonprofit organizations located in a disaster area.
To be eligible for a disaster loan for economic damage, the business must have suffered substantial economic damage as a result of the disaster, be located in a declared disaster area, have a credit history that indicates that the company has a reasonable probability of repaying the loan and being unable to obtain credit elsewhere.
What can it be used for?
An EIDL loan can be used for a wide range of purposes, including payroll support, sick or family leave, mortgage or rent payments and utility payments. The amount of the loan you receive is based on your economic injury and your estimated financial need, which will be determined by the Small Business Administration (SBA).
What can it not be used for?
EIDL loans cannot be used for certain purposes, such as refinancing long-term debt or expanding your business. Also, EIDL loans cannot be used to pay dividends or salaries to the company’s owners, partners or shareholders.
How to get an EIDL loan
To get an EIDL loan, you must first contact the Small Business Administration (SBA) to determine eligibility and apply for a loan. Then fill out the application, which will include information about your business and your financial needs. After that, a loan officer will review your application and determine the loan amount for which you are eligible. Once approved, you will receive the loan in a lump sum.
READ MORE: Small Business Loan Requirements
The best financial disaster loans for small businesses in 2022
If your business is struggling in these tough economic times, you are not alone. Fortunately, EIDLs are available to help businesses recover. Here are the best small business loans in 2022.
1. Small business administration EIDL
The SBA EIDL is a government-backed loan that provides long-term, low-interest disaster relief financing to small businesses and nonprofit organizations that have been adversely affected by a declared disaster.
2. Fast finance
To be eligible for a Rapid Finance Small Business EIDL Loan, you must also have a minimum credit score of 550, your business must have been in operation for 2 years or more and have a monthly income of at least $10,000.
You must be in business for at least one year and have a minimum monthly income of $3,000 to qualify for an EIDL small business loan. Kabbage also requires a minimum credit score of 640.
Lendio is a small business lender that offers EIDL loans to businesses that have been in business for at least six months, have a minimum monthly revenue of $4,000 and have a minimum credit score of 580.
To get an EIDL small business loan from OnDeck, your business must have been in business for at least one year and have a minimum monthly revenue of $8.5K. Your credit score must also be at least 600.
To get a small business EIDL loan with Fundera, your business must have been in operation for at least one year and have a monthly income of at least $16,000. Your credit score must also be at least 620.
7. Big Think Capital
To qualify for an EIDL small business loan, your business must have been in operation for at least six months and have monthly revenue of at least $8,000. You must also have a minimum credit score of 500.
Frequently asked questions
How much can I borrow with an EIDL loan and what are the interest rates/terms/conditions etc. attached to it?
The Small Business Administration (SBA) provides disaster assistance in the form of Economic Disaster Loans (EIDLs) to small businesses affected by disasters. The SBA can provide up to $500,000 with an interest rate of no more than 4% and terms of up to 30 years. There are no prepayment penalties or fees.
How long do I have to repay my EIDL loan and what repayment options are available to me if I can’t pay the monthly payments etc.?
EIDL loans cannot be forgiven. The good news is that the first payment due date has been extended from 12 months to 24 months from the date of the note. There is also a grace period during which full or partial payments can be made (but are not required). It can be deferred up to 30 months from the date of the note. However, interest will continue to accrue during the deferral period.
What is the maximum loan amount that can be borrowed through a Small Business Administration EIDL loan?
The maximum loan amount for an SBA EIDL is $500,000. However, businesses can qualify for an EIDL and a physical disaster loan. If the business qualifies for both, the business owner would receive up to $2 million in assistance.
How long does it take to process the EIDL loan?
After applying for an EIDL loan, a decision on your application will usually be made within 21 days. If approved, you could receive your payout within five business days.
Can I still apply for EIDL COVID-19 assistance?
Unfortunately, as of January 1, 2022, the SBA is no longer accepting new COVID-19 EIDL loan applications, requests for increases or reconsiderations. Directed EIDL advance and supplementary target advance are also closed.
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