EIDL Loan requirements: What are they?

MoneySmall Business

Written by:


“EIDL” is short for an Economic Injury Disaster Loan and EIDL loans are available to small businesses, most private nonprofit agencies and small agricultural cooperatives. Backed by the U.S. Small Business Administration (SBA), these loan funds are intended to help these types of organizations when they are struggling to meet typical operating expenses because of a disaster, including natural disasters like earthquakes and hurricanes, and now the COVID-19 pandemic.


Through the signing of the Coronavirus Aid, Relief, and Economic Security Act (often called the CARES Act) in March 2020, the EIDL program received an additional $10 billion in funding to help small businesses and organizations that were financially affected by the pandemic. In April 2020, another $10 billion was added. And in September 2021, the maximum amount that an organization can borrow was raised to $2 million for COVID-related injury.


SPONSORED: Find a Qualified Financial Advisor

1. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

2. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals get started now.






Related: How to value a business: 7 valuation methods

What’s the difference between the EIDL Grant vs. the EIDL Loan?

Before we go any further, here’s an important clarification. The EIDL Loan is, as you might expect, a loan. You borrow money and you’re expected to pay it back. However, some business owners may be able to apply for a loan advance (an EIDL Advance) through the EIDL program. If the application is approved and certain criteria are met, this money can be a grant (forgivable funding). That means that the business owner would not need to pay back the Advance funds. Here’s how it works.


Businesses that applied for EIDL funding are sometimes eligible for up to a combined maximum of $15,000 in Advances. To receive one, a small business first needs to apply for an EIDL loan. If the SBA thinks the business might meet its criteria, the SBA may invite it to apply for one of the Advance programs. The first round of these grant funds was quickly used up, however, and the initial EIDL Advance is not currently available. However, two new Advances are still available through the end of 2021: The Targeted EIDL Advance and the Supplemental Targeted EIDL Advance.


The Targeted EIDL Advance provides qualified businesses with up to $10,000 if they are located in a low-income community; can show that their revenue was reduced by more than 30% during an eight-week period starting in March 2020 or later; and had 300 or fewer employees. There’s also a Supplemental Targeted Advance that can provide eligible small businesses with $5,000 that doesn’t need to be repaid. This can be made available to companies that have also received an EIDL Advance or Targeted Advance. To qualify, the business needs to be in a low-income area; have more than a 50% economic loss during an eight-week time period starting in March 2020 or later; and have 10 or fewer employees.

Does your business qualify for an EIDL Loan?

To get an EIDL loan, a business has to prove that it meets the criteria. Here’s information about EIDL loan requirements.

Businesses with 500 or fewer employees

When applying for funding, you’ll need to confirm that your organization falls into one of these categories:

  • Business (or agricultural enterprise)
  • Sole proprietor, with or without employees, or an independent contractor
  • Cooperative
  • Employee Stock Ownership Plan (ESOP)
  • Tribal small business concern
  • Certain private nonprofit organizations that are nongovernmental

Businesses with 500+ employees

If a business has more than 500 employees, it may still qualify if it can be considered “small” under SBA Size Standards.

Geographical locations

Applicants must be in one of the 50 states or in a U.S. territory.

Additional EIDL requirements

To qualify, your business cannot do the following:

  • Be engaged in illegal activities as defined in federal guidelines
  • Have someone with a 50% or greater ownership who is more than 60 days delinquent on child support payments
  • “Present live performances of a prurient sexual nature” or receive more than a minimal amount of revenue through products/services/depictions/displays of such
  • Receive more than one-third of gross annual revenue from legal gambling
  • Be in the lobbying industry
  • Be a state, local, or municipal government entity, or a member of Congress

If your business can meet these EIDL requirements and needs funds, then it may be worth exploring the program further.

EIDL Loan Terms

Funds from this SBA loan program are earmarked for businesses to “meet financial obligations and operating expenses that could have been met had the disaster not occurred.” And there are specific parameters about how much a business can receive and what the repayment terms will be.

Maximum amounts and loan length

The maximum loan amount for businesses with 24 months’ worth of economic injury is $500,000 with a 30-year term.

Interest rates

The interest rates are also set for EIDL loans.

  • 3.75% for businesses (fixed)
  • 2.75% for nonprofits (fixed)


There are no fees or prepayment penalties for EIDL loans.

Acceptable uses of EIDL loans

These funds can be used for normal operating expenses and working capital. The SBA lists the following expenses to provide some possible examples.

  • Continuation of health care benefits
  • Rent
  • Utilities
  • Fixed debt payments

As of Sept. 8, 2021, acceptable uses for COVID-19 EIDL funds have been expanded to include prepaying commercial debt and paying federal business debt.

Collateral requirements

For loans of more than $25,000, businesses must provide collateral, which can include equipment, machinery and furniture.


If you receive funds for a COVID-19 EIDL, you have the option of starting to make payments right away or you can take advantage of a two-year deferment period when interest accrues (usually that period is one year, but it’s been extended for COVID-19 EIDL loans). At the end of that period, any accrued interest is added to the loan’s principal. This loan is not forgivable so any borrower will be required to pay the balance back in full.

Calculating loan amounts

When you want to calculate what EIDL loan amount your business may be eligible for, review your financial statements to determine what expenses you need to have funded that fit within the loan’s parameters. They can include normal operating expenses and working capital. To estimate your monthly payment, input the principal amount on a loan calculator using the interest rate of 3.75% (or 2.75% for a nonprofit) and a 30-year term. If you don’t plan to make payments during the first year, remember that the interest will accrue and be added to the principal amount of your loan after the first year has passed.

Other frequently asked EIDL questions

Here are more answers to some common questions.


Q: Does my credit score matter? 


A: Credit scores will be factored into the decision-making process, but the SBA does not provide specifics about this type of EIDL qualification.


Q: Is there any more documentation I need to provide?


A: Business owners will not be asked to prove that they couldn’t get credit elsewhere, but the SBA has the right to review an applicants’ tax records.


Q: Can you have more than one EIDL loan


A: The answer is that you can’t have more than one EIDL loan for COVID-19. However, if your business was, for example, affected by a natural disaster like a tornado before the pandemic and you got an EIDL for that, you might still be eligible for an EIDL for COVID-19 also. You may also be eligible to get up to two of the different EIDL Advances.


Q: Are these taxable loans


A: Loans that you pay back, like the EIDL, are typically not considered taxable income.  The CARES Act provides that EIDL Advances, though they are essentially grants, will also not be taxed by the federal government. Plus, any expenses paid with those dollars would still be tax-deductible.

Pros and cons of EIDL Loans

Every loan has its positive side and its negatives. Here’s the rundown on both.

Benefits of EIDL Loans

There are numerous benefits to this loan program, including the following:

  • Easy Application Process: You can apply online, which can streamline the process. There’s no need to make an appointment or travel to a financial institution to apply.
  • Flexible Loan Amounts: If your application is approved, the SBA will let your business know how much you qualify for. Then you can borrow up to that amount. So, if you get approved for $125,000 but need only $100,000, you can borrow that amount.
  • Low-Interest Rates: They’re currently 3.75%, fixed, for small businesses, and 2.75%, fixed, for non-profit agencies.
  • Long Terms: The term is 30 years.
  • Flexibility About When Payments Start: There is a year of deferment (or two years for COVID-19 EIDL loans), which means your business can wait a year (or two years) to start making payments if you wish.
  • No Fees or Prepayment Penalties: If you want to start making your payments right away, you can, without penalty.

Disadvantages of EIDL Loans

There are also some disadvantages to this loan program. They include:

  • Not Forgivable: Unlike the PPP loans and the EIDL grant/Advances, these loans are not forgivable and will need to be paid back in full.
  • Limited Uses: Funds can only be used for specific purposes, such as the “continuation of health care benefits, rent, utilities, fixed debt payments.” COVID-19 EIDL loans may also be used for prepaying commercial debt or paying federal business debt.
  • Credit Scores Matter: Credit scores will be considered and factored into the decision-making process, which could present challenges to some businesses.

The takeaway

The federal government has given the EIDL loan program at the SBA billions of dollars to help small businesses and private nonprofit agencies. There are several advantages to this loan program for small businesses, including how easy it is to apply and the low-interest rate, but this loan is not forgivable and there are restrictions on how the funds can be used. If you don’t qualify for an EIDL loan or it doesn’t seem like the best choice for you, there are other small business loans available.


Learn more:

This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.

More from MediaFeed:

Is there such a thing as a safe investment?


Stocks are predictably unpredictable. And yet, even the media pundits who are paid to talk us through those roller-coaster twists seem to be surprised when there’s an especially big rise or dip in the market.

It’s no wonder average investors can get a little dizzy at the top and queasy at the bottom — or that they might start thinking about moving their hard-earned money to something safer when things get especially scary.

But is there such a thing as a safe investment?

The short answer is no. Some may be considered safer than others, but no investment is completely free of risk, because there’s more than one kind of risk.

Related: What every new investor should know about risk


artisteer / istockphoto


Investors who choose products and strategies to avoid market volatility may be leaving themselves open to other risks, including:


gopixa / istockphoto


An asset could become less valuable as inflation erodes its purchasing power. If an investment is earning little or nothing (a certificate of deposit or savings account, for example), it won’t buy as much in the future as prices on various goods and services go up.



marchmeena29 / istockphoto


A change in interest rates could reduce the value of certain investments. These can include bonds and other fixed-rate, “safe” investment vehicles.


William_Potter / istockphoto


Could an asset be sold or converted if the investor needs cash? Collections, jewelry, a home, or a car could take a while to market — and if the owner is forced to sell quickly, the price received could be lower than the asset is worth. Certain investments (certificates of deposit, some annuities) also may have some liquidity risk because they may offer a higher return in exchange for a longer term, and there may be a penalty if the investor cashes out early.




An investment could lose its value because of the way it’s taxed. For example, different types of bonds may be taxed in different ways.




A change in law could lower the value of an investment. For example, if the government imposes new regulations on a business, it could result in higher costs (and lower profits) for the company or affect how it can serve its customers. Or, if taxes go up in the future, savers who put all or most of their money into tax-deferred accounts [IRAs, 401(k)s, etc.] could end up with a hefty tax bill when they retire.




An investment in a foreign stock could lose value because of currency problems, political turmoil and other factors.




When an investment matures (think CDs and bonds), the investor might not be able to replace it with a similar vehicle that has the same or a higher rate of return.



JJ Gouin / istockphoto


If a person can’t invest without risk, why invest at all? Because every year, goods cost more and more, which can make it difficult to save for a goal, build a nest egg in a basic savings account or by stuffing crumpled bills in a coffee can hidden in the back of the closet. (Not that there’s anything wrong with keeping a little stash of fun money or a savings account for emergency funds.)

There’s a reason the sayings “nothing ventured, nothing gained” and “no risk, no reward” have been around so long.

But besides all those different types of investment risk, there are also different levels of risk, from low to moderate to aggressive or even speculative. And having some knowledge of where various investments fall on that range of risks — as well as the types of risks a particular investment could be exposed to — may help investors find the returns they need while still holding on to some sense of control.

Of course, it also helps to know thyself.

Because netting bigger rewards often means taking on more risk, investors may benefit from understanding the degree of risk they’re comfortable with and capable of enduring.

Are they willing to get on the biggest, baddest thrill ride out there, hanging on with white knuckles through the peaks and plummets? Or would they prefer something that’s slow and steady, that keeps chugging along with no big surprises?

Or maybe they’d be happiest somewhere in the middle, with the potential for a few minor bumps, but not the kind of crazy stuff that could leave them financially and emotionally drained.

Unfortunately, investors aren’t likely to find big signs posted in front of their choices (Warning: You must be this risk tolerant to buy this stock). That’s why some investors research every asset they add their portfolio — or get help from a professional advisor.




It is possible to get a general feel for where various investments fit on the risk-to-reward scale. For example, certificates of deposit might be on the low end as far as risk, while hedge funds and promissory notes could be on the higher end of the scale.


Antonio_Diaz / istockphoto


Investors who are shopping for something very low in risk and who are willing to accept a lower return might look at CDs, U.S. savings bonds, and U.S. Treasury securities (bills, notes and bonds).

Because interest rates are currently so low, none of these investments offer a big payoff, and they’re vulnerable to inflation and/or liquidity risk. But it’s unlikely an investor would lose all or a big chunk of their money with any of these choices:


William_Potter / istockphoto


CDs are similar to a savings account, and they’re FDIC-insured, which means the government will cover the depositor’s principal and interest (up to $250,000) if the bank or savings association the CD is at fails. But unlike other bank accounts, savers must leave their money in the account for a designated period of time — usually from a few months to a few years. The longer the term, the higher the interest rate. And if savers take out the money early, they might have to pay a penalty (although there are some exceptions).

CDs used to be a popular tool for those looking for a safe place to stow their money, when interest rates were in the double digits. But these days, with rates averaging less than 1%, even for a five-year CD, they’ve lost their luster for many who are looking to grow their money — or, at least, keep up with inflation.


William_Potter / istockphoto


Investors purchase EE savings bonds (the most common type of savings bond) from the U.S. government for half the face value and accrue interest monthly based on a fixed rate. The interest rate is set for the first 20 years after purchase, and the Treasury guarantees an EE bond will be worth at least its face value when those 20 years have passed. After that, the Treasury resets the interest rate and extends the maturity by 10 more years.

Investors don’t have to hold onto a savings bond for the entire 30 years, but they do have to wait at least a year before redeeming it. And they’ll forfeit three months’ interest if they redeem a bond during the first five years after they purchased it. The current rate for EE bonds is 0.10% annually, so the return may be safe, but it’s also slow.


webking / istockphoto


Treasury securities (bills, notes, and bonds) are sold and backed by the “full faith and credit” of the U.S. government. What does that mean? Treasury securities provide funding for the government in exchange for a fixed interest rate. Because the government has the means to repay its investors (by printing more money or raising taxes), it’s highly unlikely it will default on these obligations, so investors are guaranteed the return of their principal and any interest they have coming, as long as they hold onto the security until its maturity date.

Treasury securities have relatively low interest rates compared to other investment choices, so though they’re considered safe, they aren’t necessarily the best choice for those looking for big gains in their portfolio.

Different types of government securities come with different lengths of maturity, and their interest rates are based on those term lengths. Treasury bonds have a higher interest rate in exchange for a longer term (30 years), but that lengthy term can be a drawback.

Once an investor buys a Treasury security, the terms won’t change — even if a better interest rate comes along soon after the purchase. Investors simply have to accept that newer bonds may pay higher rates. And if they decide to sell a bond before the maturity date while bonds with higher rates are available, it could be tough to find a buyer without losing some money on the investment.


larryhw / istockphoto


Money market funds are fixed income mutual funds that invest in short-term low-risk debt securities and cash equivalents. Money market funds must comply with regulatory requirements regarding the quality, maturity, liquidity and diversification of their investments, which can make them appealing to investors who are looking for something safe and steady that pays dividends.

But because of the safety and short-term nature of the investments within these funds, returns are generally lower than those of stock and bond mutual funds that are more exposed to risk. Which means they may not keep pace with inflation.




Investors who are willing to take on more risk — even if it’s just a bit more — may find specific types of bonds and preferred stocks offer the yield they need. Their choices might include:


GaudiLab // istockphoto


Corporate bonds may not be as safe as CDs or government bonds, but they are generally considered to be a lower risk than stocks. The term “investment grade”  lets investors know a bond is a lower risk based on ratings received by either Standard & Poor’s or Moody’s.

A higher-quality investment-grade bond — rated AAA, AA+, AA and AA- by Standard & Poor’s — can be expected to perform consistently and pay interest on a regular basis that can be used for income or to reinvest. Bonds rated A+, A and A- also are considered stable, while those rated BBB+, BBB and BB- may carry more risk but are still considered capable of living up to their debt obligations. Like other types of bonds, corporate bonds are susceptible to interest rate risk, and with a longer commitment, there’s typically more exposure to that risk.




Municipal bonds, or munis, have tax advantages that corporate bonds don’t have. Though the interest rate is generally lower than similarly rated corporate bonds, they are exempt from federal taxes, and some also may be exempt from state or local taxes.

Munis also are considered fairly liquid, although there’s always the risk that, based on what’s happening in the market or economy, there won’t be a buyer. And though the default risk is considered low on munis, there is the chance that rising interest rates could cause prices to go down.


designer491 / istockphoto


Preferred stocks, or preferreds, may be an appealing option for conservative investors looking for a higher yield than CDs or treasuries have to offer. Preferreds are often referred to as a “hybrid” investment, because they trade like stocks but are like bonds in that they provide income.

They generally pay quarterly dividends that can be used as income or reinvested for more potential growth. In a worst-case scenario, if a company can’t pay its preferred dividends for a while, the money owed accumulates as backpay. And when the company resumes payments, preferred shareholders get their accumulated dividends before those who own common stocks.

Preferreds can be sold at any time, but they’re typically used as a long-term investment. Just as with corporate bonds, companies that are more financially stable will receive higher marks from credit ratings agencies, so investors can have some idea of what they’re getting into.

Still, the ins and outs of buying preferred shares can be complicated, so beginners may want to work with a financial professional who is experienced in this type of investment.




Stocks issued by big companies that have a reputation for performing well in good times and bad are typically known as blue chips. They aren’t immune from big losses, but they tend to handle market drops better than other stocks.

The companies are usually household names — Coca-Cola, Procter & Gamble, Johnson & Johnson — and have a history of dependable growth and paying consistent dividends. Investors who want to do some research can get insight on blue chips by checking out the “Risk Factors” section of a company’s annual 10-K filing.

Companies are required to list their most significant risks, usually in order of importance. Some risks apply to the entire economy, some to that particular industry and a few may be specific to that company.


Andrei Stanescu / istockphoto


We tend to think of risky investments as the type that result in either a jaw-dropping payoff or a soul-crushing loss — and that they aren’t for the faint of heart. But another way to look at it might be in terms of probability: What are the chances the investment will underperform or result in a substantial loss?

Is the potential gain worth passing up on steadier and safer investment returns? Is this an investing decision based on careful research and/or sound advice, or is it a gamble? Traditionally, risk is equated with owning stocks, but there are other investments that also require careful consideration before hopping onboard.




Cryptocurrency, or crypto, is a digital currency that operates independently of a central bank. Crypto refers to the encryption used to keep the transactions safe.

There are many cryptocurrencies in issue. The most well-known is probably bitcoin, and its price has been unstable since its founding in 2010. So while the crypto market is maturing, and there’s more oversight and regulatory control, it’s still considered an extremely risky investment.


ipopba / istockphoto


Hedge funds pool their investors’ money to buy securities or other types of investments, just like mutual funds. But they aren’t as heavily regulated as mutual funds and have more latitude when it comes to pursuing riskier investments — and they often do. They also may have higher fees than other types of funds.

Hedge fund managers are paid based on their performance, which may make them more willing to go for the bigger payoff. It isn’t a level of risk just anyone can handle: Most hedge fund investors are “accredited,” which means they have the designated level of income or assets to invest.


ErimacGroup / istockphoto


Promissory notes are similar to bonds in that investors loan money to a company and in return, they’re promised a fixed amount of periodic income. But since promissory notes are typically issued when a business can’t get a traditional loan, they’re associated with greater risk, and investors who buy these notes do so with the expectation that they’ll get a greater rate of return. The SEC also warns that promissory notes sold to investors are often scams. Investors can verify the legitimacy of a promissory note by checking the SEC’s EDGAR database or by calling their state securities regulator.




Real estate investment trusts (REITs) offer investors an opportunity to earn income through commercial real estate ownership without the hands-on work of buying and running the properties themselves. Investors can use REITs to diversify their portfolio, and some REITs may offer higher dividend yields.

But there are risks — particularly when investing in non-traded REITs, including liquidity risk, high fees and commissions that can lower an investment’s value, and tax implications. Just as with promissory notes, investors can use the SEC’s EDGAR system to review a REIT’s history and other information.




When investors are deciding how much risk they should be taking, there are a few things they may want to consider, including their age, personality and purpose. Investors who can’t handle a lot of risk for any or all of those reasons may wish to lean toward those investments that are typically the safest.

But another way to help protect a portfolio is through diversification: choosing investments from different asset classes, in different sectors and with different risk factors. Think of it as riding the coasters and the kiddie rides.

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRAthe SEC, and the CFPB, have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Invest
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA/SIPC. The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.




Featured Image Credit: syahrir maulana/istock.