As small businesses and sole proprietors continue to emerge and move forward from pandemic conditions, they might be able to take advantage of the extended COVID-19 Economic Injury Disaster Loan (EIDL) program for financial help along the way. Earlier this year, the Small Business Administration (SBA) extended the COVID-19 EIDL program through the end of the year to assist small businesses, nonprofits, agriculture cooperatives, sole proprietors, self-employed individuals, and independent contractors that, for reasons related to the pandemic, need help covering certain operating expenses.

What is an EIDL?

The EIDL program has been around for a while. In basic terms, the programs have provided economic relief to small businesses of 500 or fewer employees, agriculture cooperatives, and private non-profit organizations located in declared disaster areas.

To help with the economic fallout experienced by many small businesses during the pandemic, the SBA created a special EIDL called the COVID-19 EIDL. Unlike other EIDL programs through which borrowers could qualify for up to $2 million but only after having exhausted other sources of credit, the COVID-19 EIDL has its own loan limits and rules – and is open to self-employed individuals, sole proprietors, and independent contractors.


The COVID-19 EIDL program was first introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 and included a $10,000 advance, which was essentially a grant because it did not have to be repaid. The grant program closed in July 2020, but the loan program remained open and has evolved as the pandemic wore on. Unlike with other EIDL programs, borrowers have not had to first seek funds elsewhere.

In its latest iteration, effective in April, the COVID-19 EIDL:

  • Provides for 24 months of economic injury, with a maximum loan of $500,000;
  • Charges interest of 3.75% to small businesses and 2.75% to nonprofits, with terms of up to 30 years for repayment;
  • Includes an automatic 18-month deferral for the first payment;
  • Only requires collateral for loans over $25,000 and a personal guarantee for loans exceeding $200,000;
  • Allows businesses that were approved for an EIDL of less than $500,000 prior to April 7 to apply for an increase in their existing loan up to the maximum amount; and
  • Has an extended application period through December 31, 2021.

COVID-19 EIDL proceeds are intended to be used for working capital and normal operating expenses such as continuation of healthcare benefits for employees, rent, utilities, and fixed debt payments. Businesses that received Paycheck Protection Program (PPP) loans are eligible to also apply for an EIDL provided the proceeds are used to cover different expenses.

How to Apply

For the COVID-19 EIDL, the SBA introduced a separate, streamlined application different from the normal EIDL process. At the beginning of the application, the agency specifically reminds applicants that for the COVID-19 EIDL it is relying on them to provide correct information and that all those that apply for a loan must self-certify the information provided is correct under penalty of perjury. The SBA also notes that incomplete applications will not be fully processed.

To qualify for a loan, sole proprietors and self-employed individuals are asked to provide 12 months of revenue prior to January 31, 2020, as well as the cost of goods sold for the same period. The cost of goods sold is basically a sole proprietor or independent contractor’s cost of doing business.

Your InPrime Legal Team

Let our team help you determine if you meet the qualifications for the COVID-19 EIDL, as well as assist you in writing contracts, establishing HR procedures, and protecting your intellectual property. Measure your legal risk today by using our Business Legal Risk Assessment. In less than 5 minutes, you will see areas where our experienced attorneys can help mitigate your business and personal legal risks, and assist you as your company grows. Contact InPrime Legal online today or call us at 770-282-8967.

Disclaimer: This blog should not be used as a substitute for competent legal advice from one of our licensed attorneys.