The $10,000 Small Business Loan—What You Need To Know
Small businesses were severely and undeniably hurt by the COVID-19 pandemic, and the U.S. government created relief programs to help the affected businesses recover. One of the relief programs that is still serving small businesses is the COVID-19 Economic Injury Disaster Loan (COVID-19 EIDL). Under this program, eligible applicants can secure a non-repayable $10,000 small business loan. This guide will explain the program requirements to help you determine if you are eligible.
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The Small Business Administration (SBA) is a federal agency that partially guarantees loans for small businesses. Since the COVID-19 pandemic struck, the SBA has administered the COVID-19 Economic Injury Disaster Loan (COVID-19 EIDL).
Under the disaster assistance program, small businesses and nonprofits affected by the pandemic can secure loans of up to $2 million. These funds can be used for:
- Covering the day-to-day small business expenses
- Providing employee sick leave
- Maintaining payroll
- Paying past, current, and future debts
You cannot use the COVID-19 EIDL funds for the following:
- Expanding the business
- Paying startup costs for a new business
- Making prepayments for federal agency loans (e.g., SBA loans)
When you apply for the COVID-19 EIDL program, you may qualify for the small business loan advances. The available loan advances are:
- Targeted EIDL Advance—You can obtain a $10,000 small business loan if you conduct business operations in a low-income community area. The business should have not more than 300 employees and prove a revenue reduction of more than 30%
- Supplemental Targeted Advance—You can get up to $15,000 in advances if, in addition to operating in a low-income community, you have ten or fewer employees. You must also prove a revenue reduction of more than 50%
While you must apply for a COVID-19 EIDL to qualify for advances, you can receive them without accepting or obtaining the loan. If you are eligible, the SBA will send you an email inviting you to apply for one of the programs once they receive your COVID-19 EIDL application.
If you accept the COVID-19 EIDL, it must be repaid, unlike the advances.
Understanding how small business loans work—particularly the business credit score requirements, loan terms, and funds usage—is crucial to determine and obtain the right loan for your enterprise’s budget.
Check out the COVID-19 EIDL loan terms in the table below:
|Repayment terms||Up to 30 years|
|Personal guarantee||Required for loans greater than $200,000|
|Collateral||Required for loans bigger than $25,000|
|Fees||One-time $100 fee for the loans of $25,000 and more|
There are requirements that you and your business must meet to apply for the COVID-19 EIDL loans, for instance:
- You must be physically located in the U.S.
- You must have experienced loss in working capital as a result of the COVID-19 pandemic
- Your enterprise should have a valid IRS-issued Tax Identification Number (TIN) except for sole proprietorships
- Anyone who owns 20% or more of the business must have a valid Social Security number, regardless of their citizenship
- Sole proprietors must have a valid Social Security number
- The entity should have fewer than 500 employees, with some exceptions
Just like for other types of small business loans, the application process for the EIDL program is dictated by the lender. The SBA requires you to follow these steps if you are applying for the first time:
- Ensure you are eligible by double-checking the requirements
- Fill out the COVID-19 EIDL Form
- Create your portal account via the SBA email invite and check the Steps to Complete section for further instructions
- Review your application and sign the documents
- Hit the blue Submit for processing button when you complete all the required steps
If your business has already received funds from the EIDL program and doesn’t have an outstanding loan, you can apply for an increased loan using the SBA portal account.
The required documents depend on the loan amount you are applying for. For all loan amounts, you must submit the ODA Form P-022—Standard Resolution, federal income taxes, and IRS Form 4506-T. If you want a loan amount that is more than $500,000, you will need to submit the following documents:
- SBA Form 2202—Schedule of Liabilities
- SBA Form 413—Personal Financial Statement
- List of real estate owned by the business
Regardless of the loan amount, the SBA can request additional documentation during the review process—for instance, a copy of your profit and loss statement.
Besides SBA loans, you may qualify for some of the best small business loans offered by different lenders, like banks and credit unions. Meeting the official requirements alone is not enough to help you obtain one. You must understand what lenders look for and write a convincing loan request letter.
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