What Are SBA Economic Injury Disaster Loans?

SBA EIDL stands for SBA Economic Injury Disaster Loan. These loans are allocated to businesses, agricultural cooperatives, and private nonprofit organizations that are located in an area that’s recently been hit by a disaster—or otherwise declared a disaster area. These organizations must have suffered significant economic injury to be eligible for an SBA EIDL loan.

An area may be declared a disaster area due to floods, wildfire, civil unrest, hurricanes, and more. An SBA EIDL loan must be used for losses that are not covered by insurance of the Federal Emergency Management Agency (FEMA) for both you, personally, and your business. The money can also be used to cover business operating expenses that weren’t covered prior to the disaster, especially if said expenses could have been met before the disaster happened.

What is a COVID-19 EIDL?

Due to COVID-19, a new section of EIDL loans were opened up. These loans provided money to small businesses or organizations that had less than 500 employees and suffered a significant drop in income or other economic injury due to COVID-19. This loan can be used for working capital, and normal operating expenses like health benefits, rent, utilities and debt payments.

What Other Loans Are There?

There are four other types of business loans, such as physical damage loans which cover repairs and replacement of physical assets that were caused by a disaster, mitigation assistance to help cover small business operation expenses after a disaster, economic injury disaster loans and military reservist loans.

Reach out to an SBA EIDL loan lawyer, to further understand the types of loans available to you. Every loan has special requirements that you must meet. Not every loan is the same, and not every loan has the same offerings to you. You should shop around and get what you need—but ensure that it’s what you actually need.

What Can EIDL Not Be Used For?

EIDL loans cannot be used to refinance indebtedness, that was incurred prior to the emergency of said disaster. EIDL cannot be used to make payments on loans that are owned by a federal agency, even SBA or to a company that’s licensed under the Small Business Investment Act. You also cannot pay indirect or direct obligations to a federal, state or local tax penalty with EIDL loans. This is especially true if the penalty is fraud, negligence, or non-tax-based criminal fine, or civil fine.

You also cannot use an EIDL loan to repair physical damage, expand or relocate, even to relocate workers, or pay dividends to owners, partners, officers and stockholders. You can use it to pay out reasonable remuneration that is related to their performance of services for the business, however.

Be careful how you spend your loan, and ask a lawyer if you’re uncertain. A lawyer well-versed in EIDL loans can help you spend your loan correctly so that you don’t get in trouble with the federal government for incorrect spending.