How To Spend Your SBA Disaster Loan

The SBA recently announced the re-opening of Emergency Injury Disaster Loan funding for small business owners and Independent contractors. This means that freelancers, gig-workers, and contractors are eligible to receive an SBA Disaster loan, of which up to $10,000 is forgivable, dependent on several factors.


  • The Small Business Administration (SBA) reopened its Economic Injury Disaster Loan (EIDL) and EIDL Advance application gateway on June 15, 2020.
  • The EIDL program includes a forgivable advance of up to $10,000 ($1,000 per employee).
  • Small Businesses’ of 500 or fewer employees & independent contractors are eligible to apply.
  • The maximum loan size is $150K; the grant size is $10K

The latest funding round, making funds available to SMBs & self-employed individuals includes both EIDL loans and up to 10K in grants, at $1,000 per employee. This comes in the wake of the COVID-19 crisis, in which the SBA was prompted to meet an “unprecedented need”. 

This time around, the SBA has made significant improvements to the loan closing process, including deploying new technology and automated tools to help the claims process flow smoothly.

The latest reopening, which again makes funds available to eligible SMBs, and self-employed individuals including independent contractors, freelancers, and gig workers, includes both EIDL loans and up to $10,000 grants at $1,000 per employee. To meet what it calls an “unprecedented need,” the SBA says it has made “numerous improvements to the loan closing process, including deploying new technology and automated tools”. 

These are welcome changes as funding dries up quickly, and processing claims rapidly is critical.

The Requirements

  • Be an SMB or agricultural business with < 500 employees
  • Be an independent contractor, freelancer, gig worker, or sole proprietor (with or without employees)
  • Must have been in business as of Jan. 31, 2020

Spending Rules

  • You can use an EIDL loan or advance to pay debts, payroll, accounts payable, and other bills that can’t be paid due to the impact of COVID-19.
  • You can apply for a PPP loan as well as an EIDL loan and advance but any EIDL advance will be subtracted from the forgiven amount of your PPP loan.
  • The interest rate on EIDL loans is 3.75% for small businesses and 2.75% for nonprofits.
  • Loan repayment terms up to 30 years are available with payments deferred for one year.
  • No collateral required for loans < $25,000.
  • No personal guarantee required on loans of less than $200,000.
  • If you receive a grant but are not approved for the loan, you can keep the grant.

What You CAN’T Use the EIDL for

  • You cannot use EIDL funds and PPP loan funds to pay for the same things.
  • To pay bonuses or dividends.
  • No disbursements to owners, partners, officers, directors, or stockholders are allowed, except when related to the performance of services for your benefit.
  • To expand facilities or acquire fixed assets.
  • EIDL monies may not be used for physical repair or replacement, or relocation.
  • You can’t use the money to refinance long-term debt, pay down loans provided by another federal agency, or pay any part of direct Federal debt.
  • For Contractor Malfeasance
  • You are not permitted to use EIDL funds to pay any penalty for a lack of compliance with a law or regulation.
  • For contractor malfeasance.

How To Apply

As per the SBA, the online EIDL application has been simplified and the estimated time to complete it is approx. two hours and 10 minutes or less. The application consists of 5 parts

  1.  Disclosures, 
  2. Business Information 
  3. Business Owners Information 
  4. Additional Information
  5. a Summary.

Many of our clients opt to have us complete & submit their EIDL application for a small fee of $250. Funding fills up quickly and is distributed on a first-come, first-serve basis.

You have the option to request a loan advance (grant) at the end of the application. Don’t forget to do this. Otherwise, you won’t be considered for the grant. After you complete and submit your application, the SBA will generate a confirmation number. Keep that number to use for any follow-up with the SBA.

Now What?

Once you’ve fulfilled all of your relevant documents and had your application submitted, sit back and relax. Generally, the grant can be received within three days of approval. The SBA tends to deposit the funds into your account without notification, so make sure to check your balance often.

Want us to apply for you? Book a call with one of our experts

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