The Military Reservist Economic Injury Disaster Loan program (MREIDL) provides funds to help an eligible small business meet ordinary and necessary operating expenses that it could have met, but is unable to meet, because an essential employee was called-up to active duty in their role as a military reservist.
Eligibility
Businesses with the financial capacity to fund their own recovery are not eligible for MREIDL assistance. Federal law requires SBA to determine whether a business has credit available elsewhere—that is, if credit in an amount needed to accomplish full recovery is available from non-government sources without creating an undue financial hardship. Generally, SBA determines that over 90 percent of loan applicants do not have sufficient financial resources to recover without the assistance of the Federal government.
Use of Loan
These loans are intended only to provide the amount of working capital needed by a small business to pay its necessary obligations as they mature until operations return to normal after the essential employee is released from active military duty. The purpose of these loans is not to cover lost income or lost profits. MREIDL funds cannot be used to take the place of regular commercial debt, to refinance long-term debt, or to expand the business.
Filing Period
The filing period for MREIDL assistance begins on the date the essential employee receives a notice of expected call-up and ends one year after the essential employee is discharged or released from active duty.
Credit and Collateral Requirements
SBA must have a reasonable assurance that a MREIDL can and will be repaid.
Collateral is required for all MREIDLs over $50,000. SBA takes real estate as collateral when it is available. SBA will not decline a loan for lack of collateral, but will require the borrower to pledge collateral that is available.
Interest Rate
The interest rate is 4 percent.
Loan Term
The law authorizes loan terms up to a maximum of 30 years. SBA determines the term of each loan in accordance with the borrower's ability to repay. Based on the financial circumstances of each borrower, SBA determines an appropriate installment payment amount, which in turn determines the actual term.
Loan Amount Limit
The maximum loan amount is $2 million. The amount of each loan is limited to the actual economic injury as calculated by SBA, not compensated by business interruption insurance or otherwise, and beyond the ability of the business and/or its owners to provide. If a business is a major source of employment, SBA has authority to waive the $2 million statutory limit.
Insurance Requirement
SBA requires borrowers to obtain and maintain appropriate insurance. Borrowers of all secured loans over $50,000 must purchase and maintain hazard insurance for the life of the loan on the collateral property. Borrowers whose collateral property is located in a special flood hazard area must also purchase and maintain flood insurance for the full insurable value of the property for the life of the loan.