Standard Information Brief on Economic Injury Disaster Loans

• Help meet working capital needs caused by the declared disaster
• Help pay financial obligations and operating expenses which could have been paid had the disaster not occurred

Economic Injury Disaster Loans

• Fixed debt payments, payroll, accounts payable, etc. Extraordinary expenses caused by the disaster

• EIDLs do not replace lost revenue, lost profits or fund expansion

                                                         Available Loan Terms                          

• Loan amounts and terms (up to 30years) are set by SBA and based on each applicant’s financial condition.
• Economic Injury Disaster Loans are limited to $2,000,000, less business interruption insurance and other recoveries.
• Interest Rate is 3.725%
• Apply online for an SBA EIDL https://disasterloan.sba.gov/

Credit Requirements

Credit History

• Applicants must have a credit history acceptable to SBA.

Repayment

• Applicants must show the ability to repay all ₅ loans.

                                                   Collateral Requirements                             

• EIDLs over $25,000 require collateral
• SBA takes real estate as collateral when it is available
• SBA will not decline a loan for lack of collateral, but requires borrowers to pledge what is available.                                

Filing Requirements

• Completed application (SBA Form 5).
• Tax Information Authorization (IRS Form 4506T) for the applicant, principals and affiliates.
• Complete copies of the most recent Federal income tax returns for the applicant business; and an explanation if not available.
• Personal Financial Statement (SBA Form 413).
• Schedule of Liabilities (SBA Form 2202).

Additional Information May Be Necessary To Process Your Application.   

If Requested, Please Provide Within 7 Days Of The Information Request:

• Complete copy, including all schedules, of the most recent Federal income tax return for each principal owning 20 percent or more, each general partner or managing member, and each affiliate when any owner has more than 50 percent ownership in the affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management.
• If the most recent Federal income tax return has not been filed, a year‐end profitand‐loss statement and balance sheet for that tax year
• A current year‐to‐date profit –and‐loss statement
• Additional Filing Requirements (SBA Form 1368) providing monthly sales figures for will generally be required when requesting an increase in the amount of economic injury. 8

EIDL Eligibility

Determining eligibility for an EIDL begins with a fourpart test:

• Location
• Business Activity
• Size
• Independently Owned and Operated Business

Location

• The applicant business must have a physical presence in the declared disaster area.
• An applicant’s economic presence alone in a declared area does not meet this requirement.
• The physical presence must be tangible & significant. Merely having a P.O. Box in the disaster area would not qualify as a physical presence.

Business Activity

• Primary Activity ‐ The primary industry of the applicant & its affiliated group must be an otherwise eligible activity for the applicant to be eligible, regardless of the nature of the loss activity. (Primary activity based on revenues the year preceding the disaster)
• Loss Activity – The activity for which the loss is being claimed must be eligible.

Size

• The size of the applicant alone (without affiliates) must not exceed the size standard for the industry in which the applicant is primarily engaged; and
• The applicant combined with its affiliates must not exceed the size standard for either the primary activity of the applicant alone or the primary industry of the applicant and its affiliates, whichever is higher.

Independently Owned and Operated

• Substantial business risk – The principals must have a business risk resulting from investing in facilities and equipment and by incurring ongoing expenses, which must be paid regardless of whether the operation generates a profit (example: a crew member on a fishing boat would not be eligible).
• Free from significant control – The applicant business must be free from significant control by other concerns (e.g., the customers or businesses that pay for its services).
• Effect of IRS Guidelines – Merely filing a Schedule C with the ₁₃ Federal Tax Return does not qualify the individual as an independently owned and operated business. 

Ineligible EIDL Applicants

• Religious Organizations
• Charitable Organizations
• Consumer and Marketing Cooperatives (Except small agricultural Co-Ops)
• Gambling Concerns

(Ex: Concerns that derive more that one-third of their annual gross revenue from legal gambling activities)

• Casinos & Racetracks

(Ex: Businesses whose purpose for being is gambling (e.g., casinos, racetracks, poker parlors, etc.) are not eligible for EIDL assistance regardless of 1/3 criteria above.

• Concerns Engaged in Illegal Activities 14
• Lending or investment concerns

Ineligible EIDL Applicants (cont.)

• Speculative Activities
• Pawn Shops

(Ex: If 50% or more of previous years income was derived from interest they are not eligible)

• Real Estate Developers

(Ex: engaged in subdividing real property into lots and developing it for resale on their own account)

• Multi-Level Sales distribution (Pyramid) concerns
• Loan Packagers who derive 30% or more of their annual income from the preparation of applications seeking financial assistance from SBA.
• Concerns with principals incarcerated, on parole or probation. – The concern remains ineligible if the parole or probation is lifted solely because it is an impediment to obtaining a loan. 15

Ineligible EIDL Applicants (cont.)

• Government owned entities – except for businesses owned or controlled by a Native American tribe.
• Political or Lobbying Concerns
• Concerns engaged in the sale of products or Services or Live performances of a prurient sexual nature.
• Concerns not located in a declared disaster area
• Concerns determined by SBA to have credit available elsewhere.
• Concerns involved in change in ownership situations – entities which had a substantial change of ownership (more than 50%) after the impending economic injury became apparent, and no contract of sale existed prior to that time are ineligible.
• Concerns established Post-Disaster – If a small concern was established ₁₆ after an impending economic injury became apparent, the owner assumed the risk and did not incur economic injury.

 

SBA Office of Disaster Assistance

Contacts for the Public

For More Information about SBA disaster assistance programs, go to:

www.sba.gov/disaster Or, contact SBA’s Customer Service Center at:

1-800-659-2955  /  1-800-877-8339 (TTY) Or by email at:

disastercustomerservice@sba.gov