What freelancers need to know about the EIDL program

Apr 29, 2020

While the Paycheck Protection Program (PPP) was newly created by the CARES Act, Economic Injury Disaster Loans have been offered by the Small Business Administration for years, traditionally to businesses in regions that have been impacted by a natural disaster. The CARES Act, passed in March as the first major stimulus bill in response to the coronavirus crisis, added funding for the Emergency Advance feature of the program, which is meant to quickly provide up to $10,000 to all businesses who apply.

Because this program is new to most freelancers, we've answered the most common questions about EIDL, what it does, and how it can help you right now.

How much money can I get?

There are two parts to the EIDL program: the loan, which is currently capped at $15,000, and the Emergency Advance, which is calculated at $1,000 per employee with a maximum of $10,000. For freelancers, that means the maximum advance you can receive is $1,000. The advance does not need to be repaid even if you are ultimately denied an EIDL loan for credit reasons and can be considered a grant.

What are the requirements to qualify?

The program is open to businesses (including sole proprietors and independent contractors) that have been in operation since at least January 31, 2020.

Do I have to find a bank to accept my application?

No. Unlike PPP loans, EIDL is administered entirely by the Small Business Administration. Applications are currently frozen, pending the infusion of an additional $10 billion in funding, which was signed into law on April 24 and should be arriving any day. When applications open, you can submit yours here.

Can I apply for PPP and EIDL at the same time?

Yes. As long as you use the funds for different purposes, you can receive money from both programs. So, for a freelancer, PPP funds would be used to replace your usual income for 8 weeks, while you could use EIDL money to pay rent, buy supplies, or make interest payments on business debt. You will need to demonstrate to the SBA how the money was spent, so keep good records.

Do I have to prove I was personally affected by COVID-19 to apply?

No. The pandemic has been officially designated a “disaster” for the purposes of the program, so any business in the U.S. is considered to have been affected.

What are the terms of the loan?

If you receive an EIDL loan (not just the advance), the repayment rate is a maximum 3.75% over a term of up to 30 years. Payments will be deferred for one year. You do not have to provide collateral.

How long will it take to get money?

Once your application is accepted into the system, the SBA reports advances will be sent within 30 days, while it may take up to 90 days for an administrator to review your credit and approve your loan application. Advances were originally supposed to be sent within three days, and Congress is pushing the SBA to meet that timeframe, but like most funding programs, the SBA has been overwhelmed by demand.