More than a year and a half following the January 2020 arrival of the COVID-19 pandemic in the U.S., small business owners around the country are still feeling its economic impact. Not only did unemployment surge to almost 15% — the highest rate since data collection began in 1948 — but it reached levels compared to the Great Depression. As of June 2021, over 25% of U.S. small business owners were still reporting that the pandemic was having a negative impact on their operations.

If you are a small business owner who has been impacted by the coronavirus crisis, you can still apply for relief in the form of a disaster assistance loan from the U.S. Small Business Administration. This article covers six of the most important things you need to know about the SBA's COVID-19 Economic Injury Disaster Loan (EIDL), including:

  • What the SBA EIDL loan covers
  • How to determine if you are eligible for the low-interest business loan
  • How much money you can receive
  • What the interest rate is and how long you have to pay back your loan
  • How to apply for the loan
  • How you might be eligible for an extra $15,000 that you don't have to pay back

This article also discusses how keeping proper accounting records is key to tracking all of your business operating expenses and ensuring that you meet your SBA loan application and payment obligations.

What Does the COVID-19 EIDL Cover?

SBA Economic Injury Disaster Loans are designed to provide economic relief to small businesses and nonprofit organizations experiencing a temporary loss of revenue due to a natural disaster or crisis. The purpose of the COVID-19 EIDL is to help small businesses that are in distress due to the COVID-19 pandemic pay their operating expenses so they can stay in business.

Allowable Uses for the COVID-19 EIDL Funds

As long as the funds are used as working capital and cover usual operating expenses, they can be used in any way the business owner chooses. For example, funds can be used for:

  • Business rent, renter's insurance, and utilities
  • Fixed debt payments (as long as you are not using the funds to refinance or pay off debt)
  • Continuation of employee health care benefits
  • Inventory costs
  • Office supplies
  • Web hosting
  • Merchant fees

What You Can't Use EIDL Funds for

While the EIDL is very flexible, you are prohibited from using the funds you receive under the program to pay certain expenses and for certain things. In fact, the loan agreement specifically excludes the use of the funds for the following:

  • Paying shareholders dividends
  • Paying out bonuses
  • Repaying loans from shareholders or principals
  • Paying loans on personal property
  • Owner draws and distributions (unless as compensation for services actually performed)
  • Paying down other federal loans
  • Relocating your business or expanding your current facility/location
  • Fixing physical damage to your property
  • Purchasing new fixed assets
  • Refinancing debt

If you previously received a Paycheck Protection Program (PPP) loan, you cannot use your EIDL funds for the same expenses that are covered by the PPP loan within that loan's forgiveness period, which could include:

  • Payroll costs
  • Rent or lease payments
  • Utility payments
  • Mortgage interest

However, you are still allowed to use your EIDL funds for any of these expenses you are not using your PPP funds for.

How to Track the Use of EIDL Funds

As the borrower of EIDL funds, you are responsible for how you track the use of those funds. While the lender does not mandate any particular tracking or reporting mechanism, you are required to keep good records in the event the SBA asks you for information. Using an intuitive accounting software suite — such as Skynova's small business accounting software — can help you ensure compliance with your EIDL contract.

How to Determine If You're Eligible for the COVID-19 Economic Injury Disaster Loan

Small business owners, nonprofits, and qualified agricultural businesses — those with 500 or fewer employees and that meet certain additional legal requirements — in all 50 U.S. states, Washington, D.C., and the U.S. territories are eligible to apply for a COVID-19 EIDL.

To be considered a small business for SBA loan purposes, your small business must:

  • Be a for-profit business of any legal structure
  • Be independently owned and operated
  • Not be nationally dominant in its field
  • Be physically located and operate in the U.S. or its territories

If you meet the above criteria and have fewer than 500 employees, you will likely be considered a small business under SBA standards. In some instances, you must also meet the SBA's size standards, which vary by industry. Some examples are:

  • Construction industry. You cannot have more than $36.5 million in average receipts
  • Retail trade. You have to look at sub-industries. For one-third of all retail trade sub-industries, you cannot have more than $7.5 million in average annual receipts. Other sub-industries require fewer than 100 to 500 employees.
  • Transportation and warehousing. Some sub-industries in transportation and warehousing are defined by a range of $7.5 million to $37.5 million in average annual receipts. Others are defined as not having more than 500 to 1,500 employees.
  • Information industry. Depending on the sub-industry, the maximum number of employees can range from 500 to 1,500 and the maximum average annual receipts for this industry range from $7.5 million to $38.5 million.
  • Real estate, rental, and leasing. No more than $7.5 million to $32.5 million in average annual receipts are allowed.

How Much Money You Can Receive

In its original form, the COVID-19 EIDL limited loans to $150,000 or six months of working capital. Effective April 7, 2021, as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), this amount was increased to 24 months of working capital with a maximum amount of $500,000. If you applied for a Coronavirus EIDL under the original disaster loan program, you have two years from the date of your loan to request additional funds up to the applicable new limit.

It is not always easy to calculate exactly what you are entitled to request under the parameters of the loan. Individual loan amounts are based on the projected losses a business might suffer due to the disaster. If you were applying for disaster loan assistance for a hurricane or a tornado — a disaster that had a beginning and an end — you would be able to find reasonable methods to calculate how long cleanup and recovery would be in your particular disaster area.

For something like COVID-19, however, there is so much uncertainty surrounding how long the pandemic will continue and how it will impact different businesses in different locations that determining what your projected losses will be is next to impossible. The best you can do is consult with a trusted advisor, assess your financial situation, and be certain to track all of your operating losses.

EIDL Loan Terms

The terms of the EIDL are straightforward:

  • For small businesses, your loan will come with a fixed interest rate of 3.75%
  • For private nonprofits, your EIDL comes with a fixed interest rate of 2.75%
  • You have 30 years to complete loan repayment and there is no penalty for early payoff
  • You may be able to defer payments for as much as 12 or 24 months, depending on when you received your loan, but interest will accrue during this time

Applying for and Receiving a Covid Disaster Relief Loan

The deadline to apply for the COVID-19 EIDL on the site is Dec. 31, 2021. Most applicants will receive a funding decision within 21 days. Once approved, disbursements are typically made within seven business days. However, there could be delays depending on how many applications are being processed at the time you apply.

Depending on how much information you have ready, the initial online EIDL application should take no more than a couple of hours.

Be prepared to provide the following information:

  • Gross revenues for the past 12 months
  • Cost of goods sold for the previous 12 months
  • General business information, including TIN, business name and address, number of employees, and the nature of your business (whether you are a sole proprietor, an independent contractor, etc.)
  • General information, such as ownership percentage and Social Security number or tax ID for each owner with 20% or more interest
  • Questions related to a criminal record and your ability to contract with the federal government
  • Bank account and routing information

After you complete the application, the SBA will email your loan application number and a request to set up an account on their online portal. Some applicants may be asked to provide additional financial information. This could include:

  • Your monthly sales figures spanning a set time
  • Schedule of Liabilities
  • IRS Form 4506-T: Request for Transcript of Tax Return
  • SBA Form 413: Personal Financial Statement
  • IRS Form 8821: Tax Information Authorization
  • Most recent financial statements

Once you've completed the application process, created an account on the SBA portal, and your loan is approved, you'll receive another notification along with the actual loan documents. After you sign the loan documents, the funds will be deposited into your bank account.

Targeted EIDL Advance

As an applicant for the COVID-19 Economic Injury Disaster Loan (EIDL), you may be eligible to receive up to $15,000 in funding from SBA that does not need to be repaid. You do not need to accept the EIDL loan or be approved for the loan to receive an advance, but once you apply for the loan, SBA will invite you via email to apply for one of the advance programs if your business is located in a low-income area. You can find additional information on this program on or seek local assistance through the SBA's Small Business Development Center.

Skynova Makes Applying for and Tracking SBA Loans Easy

Keeping your financial matters organized and accurate is easy with Skynova's business templates and financial software. Create a free account today to see how our products can help you gather loan documentation and then keep track of how you spend the funds once you receive them.

Notice to the Reader

The content within this article is meant to be used for general guidance on how the COVID-19 Economic Injury Disaster Loan works. To determine your own eligibility, please review the SBA website. For advice on how to apply for an SBA disaster loan and the proper use of loan funds, consult with a professional accountant to ensure that you're meeting all applicable government and accounting standards.