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Charles Sterck, CPA / Tax Principal in the RINA San Francisco office.
Charles R. SterckCPA /Principalview bio

How do I apply for a Small Business Administration Economic Injury Disaster Loan (EIDL)?

Accountants answer questions about the SBA Economic Injury Disaster Loan (EIDL)


And how can this help my business?

Our officials have come up with, talked about, and said many things about credits, benefits, stimulus, relief and the like. It is of little surprise that under this extreme stress, many people are immobilized with information overload. We realize that these are turbulent waters as we navigate this unprecedented event. So many people have called our office and simply said…”I just don’t know what to do”

The Small Business Administration’s (SBA) Economic Injury Disaster Loans (EIDLs) are the first line of support. These loans aren’t new. They’ve always been available in the event of disaster. However, this is the first time a virus or pandemic event has been defined as a disaster.

On March 27th, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $2.2 trillion package specifically provides $10 Billion for EIDLs and $349 billion for Paycheck Protection Program (PPP) Loans to help small businesses. For more information on the new PPP Loan program, please refer to this article written by RINA Tax Partner Ray Evans.

One thing you should be aware of is that businesses cannot get both EIDL and PPP loans at the same time.  Loans are limited to one per Taxpayer Identification Number. Still, you should apply for the EIDL loan now and the PPP loan when it becomes available.  If you qualify and accept the EIDL loan, and you subsequently qualify for the PPP loan, you can refinance the EIDL loan with the PPP loan. Otherwise, you can apply for both loans and decide which one you take if you qualify for both.  

Each business should understand both loans and take advantage of the one that is of greatest benefit to them.

Our goal here is to give you information about the SBA loan process and how you should act upon it right now.  

SBA Disaster Loans. What should I do?  How does it work?

Go the SBA Disaster Loan webpage.

Here you will find a three-step process.  

Skip step one. Yes… skip it.  Step one is all about identifying whether you are in a state or area that qualifies for the economic disaster loan. Well… every state and US territory, including the District of Columbia, are included in this program.  You can apply now!  

Some of you have applied for SBA loans in the past. More likely than not, those loans involved a Bank. In the case of an Economic Disaster Loan, the loan is between the borrower and the SBA only.  A economic disaster loan does not involve a bank.  There are several benefits to this structure. 

The SBA has full discretion over a disaster loan and the loan agreement is between you and the SBA only. One of the benefits of this structure is that the SBA has full discretion and authority over the loan, and they are working hard to approve as many loans as possible.

When completing the application, focus on the fact that you are applying for an Economic Injury loan and not a Physical Disaster.  Do not confuse the two!  Physical disaster loans are a completely different process and should you find yourself applying of a Physical Disaster loan you will find your application seriously delayed.

Here is some high-level details and answers to frequently asked questions about the SBA Economic Injury loan program and the application process

  • Loans can be up to $2M for working capital needs - by working capital, they mean costs like payroll, inventory, loan commitments and normal business expenses your business would be responsible for assuming that the disaster did not occur.
  • The loan will not cover loss of profits. The amount of the loan is based strictly upon working capital needs.  
  • Interest rates are 3.75% for small businesses and 2.75% for non-profits.  
  • Loans go to those who do not have credit available elsewhere.  This means that you cannot get a loan through a bank.  It is estimated that 90% of the loans that they will approve will be to those who cannot get credit elsewhere. While they have this requirement, the SBA also has the ability to make exceptions.  When in doubt, apply for the loan.  
  • The term of the loans will be 30 years and no payments are due for the first year.
  • There is no prepayment penalty
  • Those with loans or lines of credit from other sources still qualify
  • The SBA will run Credit Checks. Do not stress if your credit is not spotless.  The SBA will discuss your credit history and you will be given an opportunity to explain hiccups.  
  • Payment requirements for those with loans in place from previous disasters are automatically deferred to the end of 2020 automatically. You have no need to do anything for this deferment.  You may not even get correspondence.
  • Not everyone qualifies for this disaster loan. Generally, religious organizations and those in the cannabis industry will not apply. There are always exceptions so when in doubt, apply.  
  • If you started a business in 2019 you still qualify.
  • You need not produce tax returns.The application process does require that you provide financial information.
  • A small business is based upon the industry you are in and not always the number of employees you have.
  • The SBA does not give grants. Loans only
  • In order to be eligible, you are asked to show economic injury – loss of sales, drop of revenue, anticipation of future loss revenue by forecasting into the into the future. Be certain to apply for Economic Injury only – ignore Physical damage. Coronavirus is an economic injury situation. SBA loans are normally made for natural disasters.  This is different and it is important for you to understand the distinction. You could slow things down if you select physical damage.  
  • Economic Injury Disaster loans over $25K normally require real estate as collateral.  Because obtaining this type of collateral will take too long, they are only looking for general security interest in machinery, equipment, furniture and fixtures.  The SBA will not request Real Estate for collateral even if it is available for the Coronavirus loans.
  • Business are asked to fill out a one page declaration to show that they are a small business. They are not going to wait for tax returns to seach SIC codes and the like to determine that whether or not you are a small business
  • Private non-profits are eligible for these SBA loans
  • There is no application fee. If you have other options, apply to all of them. You may turn down any approval you get.  The SBA will be happy to sit and wait for you to decide.  Even if you apply with the SBA and later turn their loan offer down, you can go back later and ask to have your application reinstated.

Application process:

Skip Step One – Yep, see the discussion above…. Go directly to step Two

Complete step Two

  • Download Form 5 and complete it as best you can. It is surprisingly easier than you would imagine.
  • This application will require you complete an IRS Form 4506-T. This form gives the SBA the ability to request and obtain a copy of your previously filed tax return. in as much detail as you can.  If you must, guess.  Do not delay your application.  You may always change your response when you are working with an SBA representative. Be honest.
  • Once you submit the application you will be notified by an SBA representative.
  • Ability to get a loan elsewhere does not disqualify you from an SBA disaster loan. In order to be eligible, you are asked to show economic injury – loss of sales, drop of revenue, anticipation of future loss revenue by forecasting into the into the future
  • If anything is at all questionable, apply first with a guess! 
  • When you complete your application online it will also ask you to submit recent years tax returns. For this declaration, it is not required even though it asks for it.  Do not allow this to slow you down of fail to submit the application.

Step Three is to wait to hear from an SBA representative

  • You may reach them by phone at 1-800-659-2955
  • Or by email at

While waiting to hear from the SBA:

  • Do your homework by collecting as much data as you can. This could include but not be limited to purchase commitments, accounts payable, lease agreements, installment loans, deposits showing drop in revenue etc. 
  • Prepare a financial forecast if you can. We previously wrote a step by step piece on preparing a financial forecast. Follow these logical steps
  • Prepare, prepare, prepare.  This is your avenue to success in this process. 
  • Apply for as many programs as possible.  No one program is a one size fits all.  

For updates go to the SBA disaster web page and find the section dealing with Economic Injury. This will be where updates will be found.

Congress is expected to pass many relief programs. Watch for them.We will report on them periodically.

If you need help with any of this, please contact your RINA team or email the author.

This content is prepared solely to provide general information to our clients and friends.  While having referred to and recommendations of products and services, we are in no way representing or endorsement any product or service mentioned. This content does not constitute accounting, tax, or legal advice, nor is it intended to convey a thorough treatment of the subject matter.

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