Can an EIDL Loan Be Forgiven? Here’s What to Know

The Economic Injury Disaster Loan (EIDL) program, administered by the U.S. Small Business Administration (SBA), provides financial assistance to small businesses and non-profit organizations impacted by declared disasters. These direct loans help entities meet operating expenses and financial obligations, serving as working capital to support businesses through challenging periods.

Understanding EIDL Loan Forgiveness

Economic Injury Disaster Loans (EIDL) are generally not subject to forgiveness; they are structured as traditional loans that borrowers are expected to repay. The common misconception regarding EIDL loan forgiveness often arises from the EIDL Advance, also known as the EIDL Grant. This was a distinct financial aid provided as part of disaster relief efforts that did not require repayment. Unlike the EIDL Advance, the EIDL loan itself, which provided larger sums of capital, remains a repayable debt with standard repayment obligations.

Managing Your EIDL Loan Repayment

Since EIDL loans are not forgivable, understanding and managing repayment obligations is important. Borrowers can access their specific loan information, including current status, remaining balance, and payment due dates, through the SBA Capital Access Financial System (CAFS) portal.

EIDL loans typically included an initial deferment period before repayment began. Interest continued to accrue on the loan balance during these deferment periods, which means the total amount owed increased even without payments being made. Making voluntary payments during deferment can reduce the total interest paid over the life of the loan.

For borrowers experiencing financial challenges, the SBA offers a Hardship Accommodation Plan. This plan allows eligible borrowers to make reduced payments for a period of six months, often as low as 10% of their regular monthly payment, with a minimum payment of $25. Interest continues to accrue during this hardship period, potentially leading to a larger final payment.

To apply for the Hardship Accommodation Plan, the process varies based on the loan amount. For loans under $200,000, borrowers can typically log into their CAFS account to enroll directly. For loans exceeding $200,000, borrowers are generally advised to contact the COVID-19 EIDL Servicing Center to discuss specific requirements.

Key EIDL Loan Terms

EIDL loans are characterized by specific terms designed to provide long-term financial stability. For small businesses, the fixed interest rate on EIDL loans is typically 3.75%, while non-profit organizations generally receive a fixed rate of 2.75%. These loans are structured with a repayment period of up to 30 years, allowing for manageable monthly payments.

Collateral requirements for EIDL loans vary based on the loan amount. Loans under $25,000 are unsecured. For loans exceeding $25,000, the SBA typically requires a blanket lien on business assets. For larger loan amounts, such as those over $50,000 or $200,000, real estate may be preferred as collateral, though a primary residence is generally not required if other sufficient assets exist.

A personal guarantee is a requirement for EIDL loans exceeding $200,000. This means that individuals who own 20% or more of the business must personally guarantee the loan, making them responsible for repayment if the business defaults. Loans of $200,000 or less generally do not require a personal guarantee.

The funds from EIDL loans are intended for working capital and normal operating expenses. Permissible uses include payroll, rent or mortgage payments, utilities, and other general business expenses. The funds are not permitted for purposes such as business expansion, the purchase of fixed assets, refinancing pre-disaster debt, or paying out dividends or non-performance-related owner distributions.