Freelancers and self-employed business owners experiencing financial hardship due to Coronavirus (COVID-19) have the option to apply for an Economic Injury Disaster Loan (EIDL) — a low-interest federal disaster loan that's directly administered by the Small Business Administration (SBA). Learn whether you qualify for this loan and how receiving one may affect your taxes.
The federal tax filing deadline for individuals has been extended to May 17, 2021. Quarterly estimated tax payments are still due on April 15, 2021. For additional questions and the latest information on the tax deadline change, visit our “IRS Announced Federal Tax Filing and Payment Deadline Extension” blog post.
For information on the third coronavirus relief package, please visit our “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post.
Small business owners, private nonprofits, and agricultural businesses with fewer than 500 employees in all U.S. states and territories that meet certain criteria may qualify for an Economic Injury Disaster Loan (EIDL).
The purpose of these loans is to help businesses meet their financial obligations that wouldn't have needed assistance if the disaster hadn't occurred.
To be considered, you must generally fall into one of these categories:
You should also know that if your business falls into any of the following categories, you can't qualify for an Economic Injury Disaster Loan:
Money loaned through an Economic Injury Disaster Loan can be used for the vast majority of normal operating expenses. In addition to payroll, Economic Injury Disaster Loan money can be used to pay for
Loan funds cannot be used for certain items, including:
The Economic Injury Disaster Loan (EIDL) program was around prior to the pandemic, but the Coronavirus Aid, Relief and Economic Security (CARES) Act that went into law on March 27 expanded the program for business owners affected by COVID-19. For instance, traditional EIDLs weren't granted to U.S. agricultural businesses, but Congress has allowed those businesses to participate in the program now.
With terms up to 30 years, the interest rates for Economic Injury Disaster Loans are currently:
There are no prepayment penalties or fees for these loans, but they aren't forgivable. In other words, you must pay back the loan. Repayment doesn't start until one year after the loan money is disbursed, although interest begins accruing immediately.
Note: As part of the CARES Act, the government was previously authorizing advances in the form of grants of up to $10,000. Those advances didn't have to be paid back, but they're no longer available (keep an eye out in case they make a comeback).
Loan amounts vary between applicants and are based on how much your business has lost as a result of the emergency. While loans could be up to $2 million, they have reportedly been recently capped at $150,000 per applicant.
The online application is straightforward and requires basic information about your:
You should gather all relevant tax information and financial statements prior to filling out the application. The IRS won't provide the SBA with any missing information, so you should enter as much as you can as missing information delays the application process.
No need to wait - the applications are processed as they come in, and once the money allotted for this program is gone, then you may be out of luck. It doesn't cost anything to apply, and you aren't obligated to accept the loan if you're approved, so there really is no harm in applying.
The bottom line: An Economic Injury Disaster Loan may be just the help your business needs right now. With low-interest rates and no tax penalties for receiving the loan, you won't be putting your business at risk should you decide to accept an Economic Injury Disaster Loan.
TurboTax is here to help you navigate the different COVID-19 relief programs that you might be eligible for. Get up to date information, tax advice and tools to help you understand what coronavirus relief means to you empowering you to get more money in your pocket in this time of need at our Self-Employed and Small Business Coronavirus Relief Center.