Second Draw EIDL Loans – What You Need to Know

The Small Business Administration (SBA) has announced that it will be providing second draw Economic Injury Disaster Loans (EIDL) to small businesses and organizations impacted by the ongoing COVID-19 pandemic. This development comes as part of the Coronavirus Response and Relief Supplemental Appropriations Act enacted in December 2020, which allocated $20 billion in funding for the EIDL program.

What are EIDL Loans?

The EIDL program provides low-interest loans to businesses, agricultural cooperatives, and non-profit organizations that have suffered substantial economic injury as a result of a declared disaster. These loans are intended to help the borrowers meet their financial obligations and working capital needs that could not be met due to the disaster. The loans are not intended to replace lost income or profits, but rather to help meet financial obligations and working capital needs that could not be met as a direct result of the declared disaster.

Who is Eligible for Second Draw EIDL Loans?

To be eligible for a second draw EIDL loan, a borrower must meet the following requirements:

• The borrower must have received a first draw EIDL loan on or before December 27, 2020.
• The borrower must have experienced a 30% reduction in gross revenue during an eight-week period beginning on March 2, 2020 or later, compared to a similar period in 2019.
• The borrower must have 300 or fewer employees.
• The borrower must be located in a low-income community, as defined by the SBA.

How Much Can You Borrow?

The maximum loan amount for a second draw EIDL loan is $2 million. The actual loan amount is based on the borrower’s economic injury as determined by the SBA, which may not exceed the amount of economic injury sustained by the borrower.

What are the Loan Terms?

The interest rate for a second draw EIDL loan is 3.75% for businesses and 2.75% for non-profit organizations. The loan term is 30 years. There are no prepayment penalties or fees associated with the loan. Collateral is required for loans over $25,000, but no personal guarantees are required for loans up to $200,000. For loans over $200,000, personal guarantees may be required.

How Can You Apply for Second Draw EIDL Loans?

Applications for second draw EIDL loans will be available soon at the SBA’s website. Applicants will need to provide information about their business, economic injury, and gross revenue. The SBA may also request additional information, such as tax returns or other financial statements, to evaluate the borrower’s eligibility and creditworthiness.

Conclusion

The second draw EIDL loan program is designed to provide much-needed financial relief to small businesses and organizations that have been adversely affected by the ongoing COVID-19 pandemic. If you are eligible for a second draw EIDL loan, it could be a lifeline for keeping your business afloat during these trying times. Be sure to understand the requirements and loan terms before you apply, and consider consulting with a financial advisor or attorney to help you navigate the application process.

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