EIDL Loan Repayment Forgiveness and Deferment: What You Need to Know

Many small businesses across the country faced extreme and unprecedented financial challenges when the COVID-19 pandemic began in March 2020. Because of lockdown orders and the way that consumer behaviors changed dramatically in an instant, small business owners were left scrambling to keep their doors open.

In response to this, the federal government passed multiple economic relief bills, large parts of which were dedicated to providing financial relief to small business owners experiencing economic challenges.

The idea behind the bills was to provide the support businesses need to keep operating and avoid having to layoff a significant number of workers, which would only exacerbate the country’s problems even more.

In this article, we’ll discuss the details of one of those federal programs open to small business owners — the Economic Injury Disaster Loans, or EIDLs.

Introduction to Economic Injury Disaster Loans

The EIDL program already existed when the COVID-19 pandemic started. It was designed to provide small business owners with low-interest loans if they were experiencing economic hardship because they were located in a designated disaster zone.

When the pandemic started, the federal government simply expanded the definition of what was determined to be a disaster zone so that the entire country was covered. Under this special declaration, all small businesses were technically eligible to receive financial help through the EIDL program.

Like other federal loan programs, the Small Business Administration (SBA) ran the EIDL program. These loans were available to small businesses and some non-profit organizations that were affected by the COVID-19 pandemic.

EIDL loans provided financial options for these borrowers to cover operating expenses such as rent, utilities and other working capital needs.

In the time when the program was available, the SBA provided more than $390 billion in EIDL loans to non-profits and small businesses throughout the country.

COVID-19 EIDL Program Details

Unlike loans offered through the Paycheck Protection Program (PPP), all EIDL loans had to be repaid. That being said, they did offer very favorable loan and repayment terms to provide as much help as possible.

The program offered loans that had a repayment term of 30 years and interest rates that ranged from 2.75% to 3.75%, depending on a borrower’s profile.

As mentioned, EIDL loans are not forgivable like some PPP loans are, and borrowers must repay the loan in full, including interest.

At one point in time, the SBA offered the Hardship Accommodation Plan (HAP) for COVID-19 EIDL loans, which provided temporary relief for borrowers who were having trouble repaying the loans. However, that program ended in the first quarter of 2025.

EIDL Borrowers Eligibility and Application

To be eligible for an EIDL loan, small businesses had to have been in operation by January 31, 2020, and they had to prove that they suffered economic injury due to the COVID-19 pandemic.

Borrowers had to meet certain eligibility requirements, including having a credit score of at least 570 for a loan amount of $500,000 or less or a score of 625 for loan amounts greater than $500,000.

Those who were interested could apply either through the SBA’s website, or by contacting the SBA’s Customer Service team via phone at (833) 853-5638.

The SBA reviewed the creditworthiness of all applicants and their ability to repay the loan when making final determinations.

EIDL Payment and Repayment Terms

EIDL loans came with a long 30-year repayment term. A big benefit of these loans is that monthly payments didn’t have to start until 30 months after the disbursement date.

While interest still accrued during that period of time, the delayed repayment gave small business owners extra time to recover from the financial hardship they were experiencing.

Borrowers had the ability to make voluntary payments if they wanted to and wouldn’t be charged a prepayment penalty for doing so. Many took this route, as it helped them to reduce the balloon payment due at maturity.

Hardship Accommodation Plan Options

The HAP was a short-term program that was in place to allow eligible borrowers to make reduced payments for a six-month period. To be eligible for the HAP, borrowers had to demonstrate they were still experiencing financial hardship.

They then had to submit a request to the SBA’s COVID-19 EIDL Servicing Center, which would make a determination on approval based on a variety of factors. The HAP program was only available for loans with a balance of more than $200,000 or for borrowers who had already defaulted on their loan.

Again, though, this program is no longer available.

Loan Amounts and Interest Rates

EIDL loan amounts ranged from $1,000 all the way up to $2 million. Interest rates varied from 2.75% to 3.75%, depending on the borrower’s eligibility.

The SBA determined the amount of the loan based on the borrower’s economic injury as well as their ability to repay the loan. Collateral was required for loans greater than $25,000, with a personal guaranty required for loans greater than $200,000.

COVID EIDL Borrowers Resources

The SBA provides ongoing support, help and resources to small business owners who need it, in a variety of ways. The agency offers free or low-cost counseling through its national network of Resource Partners, for instance.

More information on these resources, including specific guidance on managing COVID-19 EIDL loans, is available directly on the SBA’s website. Or, you can call the agency’s Customer Service line directly.

Forgiveness and Loan Discharge Options

A majority of EIDL loans are not forgivable. The only exception was the Targeted Advance program, which acted like a grant and provided up to $10,000 in loan forgiveness.

With the HAP program no longer available, EIDL borrowers who are still having trouble making their payments have limited options. Those who file for bankruptcy and have a loan under $25,000, though, may be able to discharge their loan.

It’s also possible that the SBA may provide additional forgiveness options in the future.

Managing Debt and Avoiding Default

As with any outstanding debt, borrowers can avoid defaulting on EIDL loans by making regular payments and communicating directly with the SBA’s Customer Service team. Borrowers who are still struggling to make payments might be eligible for other options with the SBA, including loan modifications and refinancing.

Before making any major decision in this regard, it’s important for borrowers to seek professional advice from a financial advisor or experienced bankruptcy attorney to manage their debt.

Additional Guidance on the Economic Injury Disaster Loan Program

The EIDL loan program provided vital financing options for small business owners affected by the COVID-19 pandemic. While it provided much-needed money at favorable terms, these loans still had to be repaid.

Borrowers who are still struggling to pay can no longer take advantage of the HAP program, though other options may be available. If you are having trouble paying, you should contact the SBA directly to find out your options.

It’s also a good idea to consult with an experienced bankruptcy attorney to figure out your options. At Babi Legal Group, we have more than a decade of experience in business, debt collection, debt settlement and bankruptcy law.