As the global economy continues to grapple with the impact of the ongoing COVID-19 pandemic, small businesses across the United States have been hit particularly hard. In response, the US Small Business Administration (SBA), has rolled out a variety of programs designed to provide financial relief to struggling businesses, including the Economic Injury Disaster Loan (EIDL) program.
However, it is important for business owners to understand the terms of their EIDL agreement in order to avoid any potential issues down the line.
Here are some of the most important EIDL agreement terms to be aware of:
The amount a business receives under the EIDL program will depend on a variety of factors, including the extent of the economic injury they have experienced as a result of the pandemic. It is important for businesses to carefully consider their financial needs before applying for the loan, as there may be limits to the amount they are eligible for.
EIDL loans carry an interest rate of 3.75% for small businesses and 2.75% for non-profits. These rates are fixed for the duration of the loan, which can be up to 30 years.
EIDL loans of $25,000 or less do not require collateral, while loans over $25,000 will require collateral in the form of business assets. Business owners should carefully consider the potential risks associated with putting up collateral before accepting a loan offer.
While EIDL loans are designed to be repaid over the long-term, businesses may be eligible for deferred payments of up to 12 months. After that, the loan must be repaid, with monthly payments dependent on the amount borrowed and the repayment term.
Unlike the Paycheck Protection Program, EIDL loans do not offer loan forgiveness. However, businesses may be eligible for a grant of up to $10,000 that does not need to be repaid.
Overall, understanding the terms of an EIDL agreement is crucial for any business owner considering this program as an option for financial relief. By carefully considering the loan amount, interest rates, collateral requirements, repayment terms, and loan forgiveness options, businesses can make informed decisions about their financial future during these challenging times.