On Thursday, the Small Business Administration (SBA) posted a note(opens in new tab) explaining it is no longer accepting applications for its Economic Injury Disaster Loans (EIDL)(opens in new tab) related to COVID-19.
By now, many growing businesses in the U.S. are familiar with the EIDL. The federal government program is designed to support small businesses across the country and U.S. territories that are experiencing a temporary loss of revenue due to COVID-19.
Currently, the program is either almost or entirely out of funding from the government, according to reports from Vox(opens in new tab) and the Washington Post(opens in new tab). The SBA published a statement (opens in new tab)on Wednesday explaining that if the EIDL program and others like it were to run out of money, it would have to stop accepting applications. (Since then, news coverage has focused mainly on the Paycheck Protection Program(opens in new tab), another source of loans for small businesses that also came to a halt on Thursday.)
For more basic information on the EIDL, see “What is the SBA Economic Injury Disaster Loan program?” below. Here, we’ll cover what you need to know in light of this program’s recent pause.
What happens if I already filed an application for an SBA Economic Injury Disaster Loan but haven’t gotten money yet?
You’ll continue waiting for the SBA to process your application. The administration’s note(opens in new tab) says that “EIDL applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.”
However, the slow pace of the process has left many business owners wondering(opens in new tab) whether they’ll get their money at all. Information from the government validates their worries.
As of Wednesday, nearly four million businesses(opens in new tab) had applied for EIDL loans, an administration official told NBC. Those applications, if approved, would bring the total loan amount to $383 billion, far above the $17 billion Congress allocated for the program.
As with the Paycheck Protection Program(opens in new tab), anecdotes abound of business owners who have filed EIDL applications but not yet received funds. This includes both the loans themselves and a cash advance(opens in new tab) the SBA originally promised to send business owners within three days of a successful application.
(The rules around these loans and advances changed shortly after the EIDL COVID-19 program launched: Last week, business owners reported the SBA told them(opens in new tab) that loans could total only up to $15,000, significantly less than the $2 million originally promised. And the advances, initially $10,000 for each applicant, were later capped based on a business’s number of employees(opens in new tab).)
COVID Loan Tracker(opens in new tab), a grassroots site which has been gathering stories from business owners, estimates that just 3% of applicants have received that cash advance(opens in new tab).
In short, chances do not look good that you’ll soon receive an EIDL or advance if you haven’t already.
Can I file a new application for this loan right now?
Unfortunately, no. The SBA website links which formerly led to the application page currently redirect to the administration’s information page about its various types of loans(opens in new tab).
Are there other loan and grant options for small businesses?
Yes. However, the federal government probably shouldn’t be your first stop, as its other major program is not faring well either. As noted above, the SBA also on Thursday stopped accepting applications for the Paycheck Protection Program(opens in new tab).
We recommend consulting our rundown of all financial aid resources(opens in new tab), including loans and grants from state and city governments, nonprofits and private companies. Unlike the EIDL and its counterpart, many of those are still up and running.
What is the SBA Economic Injury Disaster Loan program?
The program existed before coronavirus changed the financial landscape(opens in new tab) for businesses across the U.S. However, some of its details changed with the passage of The Coronavirus Aid, Relief and Economic Security (CARES) Act(opens in new tab) on March 27, and again later as demand for the loans put strain on the system.
When up and running, the program provides “small businesses,” or those with fewer than 500 employees, with working capital loans. These loans were initially to cover up to $2 million, but as of April 9, the SBA told numerous applicants(opens in new tab) the maximum amount would then be just $15,000 due to demand, reports the New York Times.
During the original application process, businesses could also apply for a $10,000 loan advance(opens in new tab), which, if granted, they were set to receive within three days of a successful application, per the SBA. That didn’t happen(opens in new tab), according to multiple reports. Firstly, the SBA changed the rules on April 6(opens in new tab) such that companies can receive advances of only $1,000 per employee, up to $10,000 or 10 employees. Additionally, Sen. Rob Whittman confirmed in a tweet on April 8 that the process would take five days from the time an application is approved(opens in new tab), though many businesses reported having waited much longer(opens in new tab) with no sign of cash. Unlike the working capital loans above, these advances do not have to be repaid.
Each of these loans “may be used to pay fixed debts, payroll, accounts payable(opens in new tab) and other costs but are not intended to replace lost sales or profits,” according to the SBA.
We’ll continue updating this post with new developments. See our business resilience guide(opens in new tab) for more helpful information.