In this guide:
The Economic Injury Disaster Loan offers financial relief for small businesses that have been hit by a temporary loss in revenue. SBA economic injury disaster loans also cover most private nonprofit companies and agricultural businesses who need help recovering from a disaster.
To qualify, your business must be located in an area that has been declared a disaster, either by the Small Business Administration or the federal government. You can use loan funds for payroll, fixed debts, business adaptations required during a disaster and accounts payable. The loan cannot cover debt refinancing, nor can you use it to become current on another loan.
People often confuse the Economic Injury Disaster Loan alongside the Economic Injury Disaster Loan Advance program, but they're two different financial solutions. The Economic Injury Disaster Loan is currently available, but the Advance program was put on hold on July 11, 2020. However, the government is still processing applications for the Advance program as of mid-July 2020, and additional funding has not been approved at this time.
Whether you apply online or via a paper application, expect to provide the following documents for your Economic Injury Disaster Loan:
You may also need to submit a year-end profit-and-loss statement or balance sheet, plus monthly sales information.
Before deciding whether the Economic Injury Disaster Loan is the right SBA disaster loan for you, consider the following pros and cons:
When a physical disaster rather than an economic crisis damages your business, consider getting a Business Physical Disaster Loan. This type of loan helps companies repair or replace property, such as real estate, supplies and equipment, damaged by a disaster. There are no size requirements, so small, medium and large enterprises can apply. Nonprofit organizations, including churches, private universities and charities, are also eligible.
As with the Economic Injury Disaster Loan, you must be in an area that has been declared a disaster by the federal government. You might be required to file an insurance claim for the damage prior to applying for the Business Physical Disaster Loan, but it’s possible to receive funds from both an insurance agency and the SBA. You must reference insurance proceeds when you complete your application.
As with most government loans, you need numerous documents for a physical disaster loan. Gather the following documents before you apply so you can avoid delays:
You may also need additional information, such as:
Your personal loan officer will let you know which of these documents you need after you apply.
As with other forms of disaster relief, there are various benefits and potential disadvantages associated with the Business Physical Disaster Loan from the SBA. Consider these factors before deciding whether an SBA disaster loan is right for you.
Military Reservists Economic Injury Loans, often called MREIDLs, provide relief from economic loss associated with military members who must leave for active-duty assignments. These long-term loans offer assistance for small businesses with one or more employees who are military members placed on active duty. The goal of the loan is to help enterprises cover expenses that would have been manageable had a company’s employee(s) not been called to active duty.
Some insurance requirements apply, and funding is based on the amount your interruption insurance covers. You can’t use a Military Reservists Economic Injury Loan for lost income, lost profits or debt refinancing. However, you can use funds for regular expenses necessary for daily operations as well as the production or marketing of goods.
Applicants must confirm that a substantial economic injury has occurred as the direct result of an employee or employees who have been called for an active duty military assignment.
You may also need the following information or documents:
You may need additional documents, particularly if your business is deemed a major source of employment, as outlined by the guidelines the SBA maintains.
Military Reservists Economic Injury Loans aren't right for every company, but they can help you bounce back after losing an employee to active duty requirements. Consider these pros and cons before making a decision:
Customers who already have a loan through the SBA or an SBA-approved agency may qualify for additional funding. This funding comes in the form of an SBA Express Bridge Loan, and it’s generally designed for short-term relief. This type of loan is appropriate for business owners who need help recovering from temporary revenue loss during the spread of COVID-19. You can also use an SBA Express Bridge Loan while waiting for disbursement of an Economic Injury Disaster Loan.
This is an expedited program, which means many applicants receive funds in just 45 days. The SBA says that disbursement should take no longer than 90 days. Applicants must have established a relationship with the SBA on or before March 13, 2020 to qualify for an Express Bridge Loan.
Minimal documents are required for the SBA Express Bridge Loan compared to other SBA loans for disaster relief. That’s because a relationship already exists between applicants and the SBA.
Here are some documents you may need for an SBA Express Bridge Loan:
You may need additional documents. Lendzi can help you understand which documents you need and why they are required.
Review the pros and cons of obtaining an SBA Express Bridge Loan before you request funding. This loan is likely a good fit for you if you need fast cash and can handle a short-term repayment plan.
Keeping up with business costs during COVID-19 isn’t easy, especially when you’ve got loans due. The SBA Debt Relief program helps business owners focus on vital expenses by covering some fees for existing borrowers. Borrowers must have current loans in a regular servicing status or request a microloan disbursement by September 27, 2020.
Borrowers who received funding via Economic Injury Disaster Loans or the Paycheck Protection Program are not eligible. There is no need to apply for assistance, as benefits are automatically provided to qualifying borrowers.
The SBA is offering relief from interest, principal and other associated fees for borrowers who have qualifying loans that were disbursed prior to September 27, 2020.
The SBA will make six consecutive monthly payments for qualifying borrowers whose accounts are not in deferment. These payments will begin when the next payment is due. The SBA will also make six consecutive monthly payments for loans in deferment. These payments will start when the deferment period ends.
Borrowers who have SBA Serviced Disaster Loans for their home or business are also eligible for assistance. Borrowers do not need to apply, as benefits are automatically approved. These borrowers will receive an automatic deferral on payments until December 31, 2020. During this time, interest will still accumulate, so you may wish to keep making payments. If you continue making payments, they will be applied normally.
The SBA is offering relief from interest, principal and other associated fees.
COVID-19 and other disasters impact each business differently. If you are struggling after a local or national disaster, weigh all of your options before choosing the financial solution that works for you.
|Economic Injury |
|Business Physical |
Economic Injury Loan
|Eligibility||Small businesses; private nonprofits||Companies of all sizes who have experienced physical damage after a declared disaster||Companies with employees who are called to perform active duty military assignments||Customers who have had a relationship with the SBA since March 13, 2020 or a previous date|
|Maximum Amount||$150,000||$2 million||$2 million||$25,000|
|Term Length||30 years||3 or 30 years||30 years||Seven years, but full payment might be required sooner if you’re waiting on EIDL funds|
|Interest Rate||3.75% for small businesses; 2.75% for private nonprofits||4% to 8%||4%||6.5% or less|
|Credit Requirements||Minimum 620 FICO recommended||No minimum credit score requirement, though the SBA bases its decision on creditworthiness||No minimum credit score requirement, though the SBA bases its decision on creditworthiness||Minimum FICO Small Business Scoring Service Score of 130|
Remember, the SBA is often hesitant to provide multiple loans. That’s why it’s important to let a trusted expert, such as Lendzi, help you compare your options.
Disaster relief options are often tailored toward business owners, but you may also qualify for financial assistance if you rent or own a home. This is true even if you have a condo rather than a traditional house. Loan amounts are small compared to many SBA business loans, but you might qualify for anywhere from $40,000 to $200,000 depending on your home’s damage.
SBA Home and Personal Property Disaster Loans are geared toward individuals or couples who own or rent their home. This might be a traditional house, a condo or another type of real estate.
To qualify, your primary home must have been damaged as the direct result of a natural disaster. You cannot use SBA loans for a vacation property. SBA home and property disaster loans are for repairs, not upgrades. The SBA may make an exception if you’re requesting property upgrades designed to help prevent future damage from disasters.
Borrowers can also use SBA loans if they need to replace personal possessions that were lost as the result of a disaster. These personal possessions include clothing, appliances, furniture and cars.
Homeowners can request as much as $200,000 for property repairs. Personal property replacement is capped at $40,000 for homeowners and renters.
Interest rates range from 4% to 8%. Expect to get hit with an 8% interest rate if the SBA believes you can get funding elsewhere. The repayment term is typically 30 years, and there is a credit check required.
|Who’s Eligible?||Maximum Amount||Term Length||Interest Rate||Credit Requirements|
|Renters and homeowners, including condominium owners||$200,000 for property repairs; $40,000 for personal property replacement||30 years||4% to 8%||Credit check required|
Not everyone qualifies for an SBA loan, regardless of whether you’re a business owner or an individual. Even if you do qualify, you may wish to explore other financial solutions before applying for an SBA disaster loan. From personal loans to business lines of credit, here are some other options for financial assistance after an economic disaster.
A business line of credit covers business-related expenses, and you can use it over and over again. Think of it as a credit card, minus the plastic. There aren’t many restrictions for use, so you can pay for supplies, equipment or other essential expenses.
Funding is often quick for commercial credit lines. Some businesses receive funds in just a few days, and a credit check isn’t always required. Interest rates are comparable to credit cards, which is why many businesses prefer SBA loans. SBA loans typically have rates ranging from 2.75% to 8%.
Business owners typically need an annual revenue of $50,000 or higher to get a commercial line of credit. It also helps if your business has been operating for at least six to 12 months.
Credit cards are available for business and personal use. The type of card you request depends on your credit history and spending habits. For example, you may prefer a hotel card if you travel often or a general card if you buy a little bit of everything.
Your credit limit is determined by your credit history. Limits range from $200 to more than $20,000, so some applicants have multiple cards. You can typically use your cards for any legal activities, whether you need to pay for COVID-19 tests or expand your business.
Merchant cash advances are based on the last six to 12 months of your company’s payment history. This solution is ideal for corporations that receive a large number of credit card payments, as lenders typically review your credit card sales history.
Consider a merchant cash advance if you’re okay with a short-term financial solution. Funds are usually repaid within 18 months, but some businesses repay them after just 90 days. Advance payments are typically deducted automatically from your sales, which can be a problem if you’re experiencing a slow period due to a disaster. You may prefer a loan geared toward an economic crisis, such as the Economic Injury Disaster Loan.
The Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act offer disaster relief assistance during the COVID-19 pandemic. As a result of these bills, Americans have access to the following benefits:
Benefits are available to eligible business owners and families and may evolve over time. If you need help understanding these benefits, reach out to Lendzi for clarification. We're happy to help.
Determining which disaster relief solution is right for your business and your family can get tricky. Do you need small business disaster loans? Disaster unemployment assistance? Funds for renovations and repairs resulting from a disaster? A personal loan that you can spend as you deem fit?
Lendzi understands the ins and outs of disaster loans, and we’re happy to share our wealth of knowledge with you. Reach out via our online form or shoot us an email at firstname.lastname@example.org. Our educated team is here for you, whether you need a brief rundown of disaster loans in general or want specific advice regarding the right solution for your needs.
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