On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law. The purpose of the CARES Act was to help America’s economy in response to the COVID-19 pandemic. While the CARES Act is over 800 pages and has many different benefits, two loans that the Small Business Administration (SBA) is offering have garnered a  lot of attention. Today we will focus on the Economic Injury Disaster Loan (EIDL).

CARES Act Changes

The EIDL was not established with the CARES Act. In fact, the CARES Act only expands the EIDL and changes some of the requirements for applicants. First, the EIDL grants up to $10k in an emergency grant that the SBA must make the funds available within “days of a successful application.” This loan, referred to as the EIDL advance, will not have to be repaid, essentially making it a grant. It is important to note that even if you are denied the EIDL loan, applicants can still receive the $10k advance. Also, if an applicant applies for the Paycheck Protection Program (PPP) and is approved, the EIDL’s $10k will be subtracted from the PPP loan.

Second, the CARES Act allows eligibility for private non-profit and small agricultural cooperatives. Small businesses (SBA requirements for a small business concern), sole proprietorships, independent contractors, self-employed persons, and some non-profits are all eligible applicants.

Next, the CARES Act waives any personal guarantees on EIDL loans up to $200,000. Further, applicants will not have to certify that they are “unable to obtain credit elsewhere,” as previously required. However, applicants will have to show an ability to repay.

More Details

The EIDL is distinguished by the PPP in many ways. The EIDL is administered by the SBA and not private lenders. Potential applicants should take this into consideration when making a determination between the two loans due to the SBA’s processing time of applications. The maximum EIDL is a $2 million working capital loan with an interest rate of 3.75% for businesses and 2.75% for non-profits, with up to a 30-year term. EIDL approval is based on an applicant’s credit score and payments on the loan are deferred for one year. If the loan is under $25k, then the applicant does not have to provide any collateral, however if the loan is more than $25k, a general security interest in business assets will be used in lieu of real estate.

Comparably to the PPP, the EIDL must be used for business expenses that have been impacted by the COVID-19 pandemic. Examples of these expenses are payroll, accounts payable, fixed debt, and other bills that cannot be paid because of the disaster. The EIDL is not intended to replace lost profits or sales, and cannot be used to pay down long-term debt. Interested applicants can apply directly on the SBA’s website or by going here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance.


This is a determination that must be made on a case by case basis depending on many individual and specific factors. If you have questions about the two loans or the CARES Act in general, one of our attorneys can assist you. Please do not hesitate to contact the Wladis Law Firm if you have any questions about the above information. We will do our best to provide you with updates and will be available to answer questions as circumstances change. We may be reached at (315) 445-1700 or by e-mailing Attorney Jennifer Huse Granzow at jgranzow@wladislawfirm.com or by reaching out to your everyday firm contacts.