Economic Injury Disaster Loan FAQs Answered

Businesses that have suffered financial losses due to COVID-19 are the targeted beneficiaries of the Economic Injury Disaster Loan (EIDL). The loan offers businesses up to $2 million in assistance, plus an emergency cash advance of up to $10,000. An amount equal to the received EIDL advance will be deducted from the total approved loan. In case the borrower was not approved for the loan, they are not required to pay the advance received.

7 Common Questions regarding EIDL

There’s a lot of information a person or an organization must know regarding the loans they are trying to secure, and what type of agreement they are getting involved in. However, not all rules apply to all borrowers. In this article, we collated all frequently asked questions a debtor may have and answered them. It is important to know all the answers to the following questions to avoid any legal or financial repercussions.

1. How is EIDL different from PPP, and EIDL Advance?The funds for EIDL, EIDL Advance, and the Paycheck Protection Program (PPP) are from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Both EIDL Advance and PPP are forgivable under certain conditions while EIDL must be paid in full.A condition of at least 60 percent of the forgiven PPP loan must have been used in payroll expenses, and the EIDL Advance can be forgiven if the borrower was not granted an EIDL loan. However, if the loan application is approved, the EIDL Advance received will be counted to the total approved Economic Injury Disaster Loan amount and will no longer be forgivable
2. What is the use of EIDL?The amount you can borrow depends on the financial losses the business suffered. You can use EIDL proceeds to fund a wide variety of equity capital and regular operating costs, such as health care plan continuation, rent, services, and payments of fixed debt. However, there are certain payables for which the loan funds can not be used, such as the following:
   • Bonuses and dividends
   • Stockholder repayment or principal loans
   • Facility extension or relocation expenses
   • Paying off loans collected by a federal institution or SBA
   • Long term debt refinancin
3. I received my loan, but what if I need more financial assistance?COVID-19 EIDLs may be updated by increasing the amount to up to six months of working capital. You can ask for an increase either before or after the loan is approved. If the recipient has accepted the full credit amount provided and is still in desperate need of funds, presenting additional documents can be a way to seek an increase of financial assistance.You can send an email to pdcrecons@sba.gov with the word “INCREASE” as the subject line. Attach additional information that will be beneficial to granting the request.
4. What are the interest rate and loan terms of an EIDL loan?Small companies and non-profit organizations have a 3.75 percent and 2.75 percent interest rate respectively. Both types of borrowers have a maximum repayment period of 30 years. Maturity conditions differ depending on the willingness of the borrower to repay the loan.
5. I have a PPP and COVID-19 EIDL already and my company has not yet recovered from the effects of the COVID shutdowns; will I be eligible for another loan?Yes. It is still possible to apply for a new SBA disaster loan for losses incurred from a declared disaster in your area, even if your organization has already obtained a PPP loan or EIDL assistance due to COVID-19.
6. I am a COVID-19 EIDL beneficiary. How do I make payments?There are two options: online payments or mailed payments. Payment can be sent online by completing the SBA Form 1201 Borrower Payments. If you prefer mailed payments, be sure to include the business name, borrower’s name, tax ID, and loan number before sending them to the US SBA address.
7. Since my organization has not recovered from COVID shutdowns yet, how am I going to handle repayment?Payment of COVID-19 loans, as well as the new disaster loans for civil unrest and other crises, are automatically deferred for a year. Disaster loans that are currently in the repayment phase before the COVID-19 pandemic are also postponed until December 2020.If there is a need to apply for a new disaster loan, the stakeholder may ask SBA to prolong the deferment of other debt installments to cope with the economic burden.

EIDL: A Chance to Overcome the COVID-19 Pandemic

During the beginning of the pandemic, when dental practices have been forced to stop doing business as usual, some operational expenses did not cease. Despite what is happening in the world, expenses such as payroll, insurance, utilities, mortgage, deposits, and unpaid debts should not be overlooked.

Without an income, expenses and necessary protective equipment are understandably disconcerting for many dentists. Thankfully, the EIDL has become one of the significant sources of assistance for dental practices to continue to deliver essential healthcare services such as evaluating, diagnosing, preventing, or treating any oral disease affecting their patients’ systemic health. The EIDL is a chance for the dental community to prove that the profession is resilient—that even with COVID-19, the role of dentists in oral healthcare is vital to provide good general health.

Sources:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program#section-header-5
https://www.sba.gov/sites/default/files/2020-09/COVID%20EIDL%20FAQ%20rev%20092120-508.pdf
https://www.pay.gov/public/form/start/3723407
https://www.patientprism.com/dental-practice-management-academy/interviews/loans-budgets-comeback-strategies-dentists
https://www.dentistrytoday.com/news/todays-dental-news/item/6375-the-sba-relief-package-what-s-in-it-and-how-dental-practices-can-act
https://www.cainwatters.com/digitalblogs/how-to-use-eidl-funds