How to Apply for SBA COVID $10,000 Emergency Advance and EIDL Loan

The initial stimulus package passed by Congress provided relief to small businesses in the form of grants, forgivable Paycheck Protection Program (PPP) loans, and Economic Injury Disaster Loans (EIDL) loans.  The article below describes the program as it existed in April 2020. For information on the expansion and reinstatement of these programs in 2021, please read the following articles:

SBA Announces Reopening of the PPP Program
SBA Extends the EIDL Program 
PPP, EIDL Facts and Tips for Small Businesses and the Self-Employed

IMPORTANT: The U.S. Small Business Administration (SBA) was offering an Emergency Advance grant of up to $10,000 through the low-interest federal disaster loans program to small businesses suffering economic injury as a result of the Coronavirus (COVID-19). The original free advance program reached its funding limit and stopped providing grants as of July 2020. The article below detailed steps for getting that advance. We will post information on how to apply for help under the new stimulus package as soon as it is available. 

Under the CARES Act, small business owners in the U.S. and U.S. territories are eligible to apply for an Economic Injury Disaster Loan (EIDL) advance of up to $10,000. 

This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid. Thus, it is essentially a grant.

To apply for the advance, as well as provide information the SBA requires to determine if your business is eligible for an economic injury loan, you must fill out an application form on the SBA website. This application is short and does not ask for the amount of money you would like to borrow. You have to provide contact information, so one would expect there will additional follow up by lending authorities.  

Once you submit the application online, you will see a page that assigns you an application number. Print and save your loan application number.  You will need that number if you call to check on the status of your application. When you are contacted about your loan application, whoever contacts you should reference that number. The SBA warns that you should be sure the referenced application number is consistent with the actual application number. Any email communication from SBA will come from accounts ending with sba.gov.

Additionally, they warn businesses to watch out for phishing attacks/scams utilizing the SBA logo.  These may be attempts to obtain your personally identifiable information (PII), to obtain personal banking access, or to install ransomware/malware on your computer.

EIDL Loan Size and Use

Beyond the emergency cash advance, the SBA’s Economic Injury Disaster Loans offer small businesses up to $2 million in assistance. These are low-interest loans to provide small businesses with working capital. Loans under $25,000 do not require collateral. Loans over $25,000 will require collateral.

Note: I’d like to thank the Stony Brook Small Business Development Center (SBDC) and NYS Certified Senior Business Advisor Ann Garbarino for providing the information below. The Stony Brook SBDC is one of the SBA’s designated partners to provide support services for this effort. Located in Suffolk County, New York, local small businesses can contact them through their website. If your business is located elsewhere, you can use this page on the SBA website to find local assistance. Typing in your zip code in the box brings up a list of government-affiliated offices that can help you.   

Do this first

The first thing to do is read all of the information below and then print out the forms we’ve listed under the Forms and Documents section and gather the information you will need to complete them.

What are the criteria for loan approval?

Eligibility: The applicant business must be physically located in a declared area and have suffered working capital losses due to the declared disaster. According to the SBA’s website, small business owners in all U.S. states and territories are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19). Online businesses, consultants, and freelancers are eligible to apply in addition to brick-and-mortar businesses.  See below for businesses that may not be eligible for these loans.

Credit History: Applicants must have a credit history acceptable to SBA.

Repayment: The SBA must determine that the applicant’s business has the ability to repay the SBA loan.

What are the collateral requirements?

• Economic Injury Disaster Loans over $25,000 require collateral.
• The SBA takes real estate as collateral when it is available.
• The SBA will not decline a loan for lack of collateral but requires borrowers to pledge what is available.

What other criteria is involved?

The applicant business must have a physical presence in the declared disaster area. An applicant’s economic presence alone in a declared area does not meet this requirement. The physical presence must be tangible and significant. Merely having a P.O. Box in the disaster area would not qualify as a physical presence.

The SBA’s Economic Injury Disaster Loan funds come directly from the U.S. Treasury.

Where to Apply for a Disaster Loan

Applicants do not go through a bank to apply. Instead, they apply directly to SBA’s Disaster Assistance Program.

Application Cost

There is no cost to apply.

There is no obligation to take the loan if offered.

Other SBA COVID-19 Disaster Loan Facts

The maximum unsecured loan amount is $25,000.

Applicants can have an existing SBA Disaster Loan and still qualify for an EIDL for this disaster, but the loans cannot be consolidated.

Note: Payments on existing SBA Disaster Loans are being automatically deferred until the end of 2020.

Forms and Documents You’ll Need to Apply for Assistance

These are the forms that are normally needed to apply for an SBA Coronavirus Economic Injury Disaster Loan. Download the forms and start to gather the information you may need to complete them.

• Completed SBA loan application (SBA Form 5 or Form 5C.) Note: Form 5C is for sole proprietors.
• Tax Information Authorization (IRS Form 4506T)
• Monthly Sales Figures form

In addition, applicants, principals, and affiliates need to provide the following:

• Complete copies of the most recent Federal Income Tax Return.
• Schedule of Liabilities (SBA Form 2202).

Other information may also be requested.

Important: Before You Submit Your Application

Recheck the filing requirements to ensure that all the needed information is submitted.

• The biggest reason for delays in processing is due to missing information. Make sure to complete all filing requirements before submitting the application and forms.
• If you need help with completing the forms or have questions about the application process, contact an SBDC or other government assistance organization in your area.  
• If more funds are needed, applicants can submit supporting documents and a request for an increase. If fewer funds are needed, applicants can request a reduction in the loan amount.
• If the loan request is denied, the applicant will be given up to six months in which to provide new information and submit a written request for reconsideration.

What are some of the businesses that are ineligible for an Economic Injury Disaster Loan?

• Agricultural enterprises: If the primary activity of the business (including its affiliates) is as defined in Section 18(b)(1) of the Small Business Act, neither the business nor its affiliates are eligible for EIDL assistance. 
• Religious organizations
• Gambling concerns (example: concerns that derive more than 1/3 of their annual gross revenue from legal gambling activities)
• Casinos and racetracks (example: businesses whose purpose for being is gambling, such as casinos, racetracks, poker parlors, etc. are not eligible for EIDL assistance regardless of 1/3 criteria above)

Key Websites:

• Applicants may apply online using the Electronic Loan Application (ELA) via SBA’s secure website at http://disasterloan.sba.gov/ela
• Disaster loan information and application forms may be obtained by calling SBA’s customer service center at 800.659.2955 or disastercustomerservice@sba.gov.
• Find free local assistance for information and help with completing your disaster loan assistance application.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.