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EIDL Business Debt Relief: An Overview for Small Business Owners

Running a small business can be extremely rewarding, but it also comes with financial challenges. If you’re struggling with business debt, there may be help available through the SBA’s COVID-19 Economic Injury Disaster Loan (EIDL) program. This article provides an overview of EIDL debt relief and how it can potentially help small business owners.

What is the EIDL Program?

The EIDL program provides low-interest, long-term loans and grants to small businesses impacted by COVID-19. Funds can be used to cover operating expenses like payroll, rent, utilities, etc.In response to the pandemic, the SBA also offered debt relief by paying the principal and interest on new EIDL loans for the first 2 years. This was a huge help for many small business owners struggling with cash flow.

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Who Qualifies for EIDL Debt Relief?

To qualify for the initial EIDL debt relief:

  • Your business must have applied for an EIDL loan due to COVID-19 impacts between January 31, 2020 and December 31, 2021.
  • Your loan must have been approved by December 31, 2021.

So if you received EIDL funds during that timeframe, you likely benefited from 2 years of debt relief where your loan payments were covered.

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Has EIDL Debt Relief Been Extended?

Originally, EIDL debt relief was only offered for 2 years. But in March 2022, the SBA announced an extension of COVID EIDL debt relief for another 6 months.This means all eligible EIDL loans approved by December 31, 2021 now receive 30 months of debt relief rather than 24 months. So you have an additional 6 months before loan payments kick in.

When Do I Have to Start Making EIDL Loan Payments?

With the 6 month extension, here’s when EIDL loan payments will resume based on when you secured your loan:

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  • If you received your EIDL loan between January 31, 2020 and June 30, 2020 – Payments resume September 2023
  • If you received your EIDL loan between July 1, 2020 and December 31, 2020 – Payments resume December 2023
  • If you received your EIDL loan between January 1, 2021 and December 31, 2021 – Payments resume June 2024

So most small business owners with EIDL loans have at least another 12-18 months before payments resume.

Can I Still Apply for an EIDL Loan and Get Debt Relief?

The initial EIDL loan program closed on December 31, 2021. So new EIDL loans are no longer being approved.However, in September 2022, the SBA reopened EIDL COVID disaster loan applications specifically for small businesses in low-income communities.The new loans have very favorable terms, including:

  • Super low interest rate fixed at 3.75%
  • 30-year repayment term
  • Automatic deferment of payments for the first 2 years

So if you’re located in a “Qualified Census Tract” and suffered economic losses due to the pandemic, you may still be able to secure an EIDL loan with 2 years of built-in debt relief.

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What Happens After COVID EIDL Debt Relief Ends?

Once your 24-30 months of payment relief ends, you will have to start making payments on your EIDL loan. The good news is that EIDL loans have very favorable long-term repayment terms:

  • 3.75% fixed interest rate
  • 30-year loan term
  • Automatic deferment of first payments

Unlike short-term loans or credit cards charging 15-30% interest, your low 3.75% EIDL loan rate will save you tens of thousands of dollars over the life of the loan.The SBA will notify you ahead of time when your debt relief period is ending and payments will resume. So you’ll have time to prepare and budget accordingly.

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Can I Pay Off My EIDL Loan Early?

Yes! There are no early repayment penalties or fees if you can pay off your COVID-19 EIDL loan early.In fact, paying off debt ahead of schedule is financially wise so you end up paying less interest over time.Some small business owners have even suggested using your EIDL funds to pay off higher-interest debt first if possible. Because your EIDL loan probably has the lowest interest rate you’ll ever see!

Strategies for Preparing for EIDL Loan Payments

Here are some tips to prepare for when EIDL debt relief ends and loan payments kick in:🔸 Get organized – Make sure you know loan amounts, interest rates, monthly payments owed. Set calendar reminders for all deadlines.🔸 Budget ahead – Create a budget for increased monthly expenses once EIDL payments resume. Identify areas to cut costs if needed.🔸 Explore refinancing – See if you can get a lower rate through an SBA 7(a) loan or credit union financing. This SBA Lender Match tool can help find options.🔸 Ask about hardship help – If payments will be a hardship for your business, proactively ask your lender about SBA disaster loan deferments or additional relief options before missing payments.🔸 Pay down principal – Make any extra payments toward principal now while payments are deferred. This saves on interest costs long-term.🔸 Consider selling assets – If your business suffered significant economic injury, selling unused assets can help free up cash flow for loan payments.The ending of EIDL debt relief doesn’t have to be a crisis with some planning. If COVID-19 still negatively impacts your sales, be proactive communicating with your lender for assistance. The SBA may have additional relief options beyond the initial 30-month deferment period.

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In Summary…

I hope this overview gives small business owners clarity and confidence on where things stand with Economic Injury Disaster Loan debt relief:

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  • COVID EIDL loan payment relief has been extended 6 additional months to 30 months total.
  • Most small business owners now have until September 2023 or later before loan payments resume.
  • New EIDL loans may still be available for low-income community small businesses, with automatic 2-year debt relief.
  • Strategically prepare now for ending of payment deferment and resuming loan payments.

The EIDL program has been an economic lifeline for millions of small business owners impacted by COVID-19. Take full advantage of the remaining deferment period to stabilize your operations.As always, be proactive communicating with your SBA lender if you anticipate any issues resuming affordable loan payments. They may be able to help through additional deferments, refinancing options, or hardship assistance.Small businesses are the backbone of the American economy. I wish all business owners impacted by the pandemic much success recovering and getting back to more normal operations!

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