Small businesses are facing extraordinary economic disruptions during the COVID-19 pandemic. While social distancing and the closure of all nonessential businesses helps to limit the virus' spread, these measures have caused catastrophic impacts on business revenue. The Federal government has modified its prior disaster loan program to provide some relief to small business owners during the time of social distancing.
In March, Congress passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES). A component of the act expanded the Small Business Administration’s (SBA) existing Economic Injury Disaster Loan Program (EIDL) to allow for eligible businesses to apply for loans if they have suffered economic injury as a result of the COVID-19 pandemic. The EIDL program previously existed in the context of physical, natural disasters, but the CARES Act amended applicable language to allow it to apply to emergencies such as the current pandemic.
Unlike the Payment Protection Program loans (PPP) discussed in previous publications (See Overview of CARES Act and Additional Details on the PPP), EIDLs are low-interest, long-term loans that do not have the same forgivable component as PPP loans. However, under some circumstances using an EIDL in conjunction with a PPP loan may be advantageous for an eligible business.
This article provides an overview of who can apply for EIDLs, describes EIDL-specific components and benefits, and gives a brief synopsis of the differences between an EIDL and a PPP loan and how the two can be used together.