More Funds Available For Targeted EIDL Advance Grants

Updated 3/11/20

The American Rescue Plan allocates an additional $15 billion for Targeted Emergency Injury Disaster Loan Advance grants to small businesses in low-income communities affected by the COVID-19 pandemic.

The businesses will be eligible for up to $10,000 each through the EIDL program overseen by the Small Business Administration.

This newest program will roll out in stages, with the first being businesses that did not get the full amount they applied for in earlier EIDL grant phases. Those grants were for $1,000 per employee, up to a total of $10,000. To be eligible, a business can have no more than 300 employees and must have suffered a loss of 30% during an eight-week period from March 2, 2020, and Dec. 31, 2021, compared with an eight-week period prior to March 2, 2020.

In the second phase, which will begin 14 days after the first phase starts, the SBA can make grants to small businesses that have been “severely impacted.” Eligible businesses in this group must have suffered an economic loss of more than 50% and have 10 or fewer employees. The SBA can make grants of $5,000 to these businesses.

Fourteen days after the second period begins, the SBA can make $5,000 grants to “severely impacted” businesses, defined as having 10 or fewer employees and a loss of between 30% and 50%.

As part of a previous COVID-19 relief package that was passed in December 2020, the SBA stated that “Advance funds of up to $10,000 will be available to applicants located in low-income communities who previously received and EIDL Advance for less than $10,000, or for those who applied but received no funds due to lack of available program funding.”

Qualified businesses that had received a partial grant and those that applied for an EIDL on or before Dec. 27, 2020, but did not get an advance due to the lack of available funds will be contacted via email by the SBA. If your business is contacted, make sure the email comes from @sba.gov before providing any sensitive information.

Here is some important EIDL information about qualifying for the $10,000 advance:

  • The business must be located in a low-income community. The term low-income community is defined as meaning “any population census tract if the poverty rate for such tract is at least 20 percent, or in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.”
  • The SBA will give advance priority to businesses that did not receive the full grant earlier, followed by qualified businesses that did not get a grant because earlier funding had been exhausted.
  • The grants are not taxable, and businesses that receive them will still be able to take a tax deduction for qualified expenses that those funds are used for. Grants also will not be deducted from Paycheck Protection Program for loan forgiveness purposes.

Emergency Injury Disaster Loans still available

  • Qualified businesses with 500 or fewer employees can apply for an EIDL loan.
  • Loans themselves can be for up to $150,000 and at a rate of 3.75% for businesses and 2.75% for non-profits. The loan term is for up to 30 years and payments are deferred for one year, but interest will accrue from the time the loan funds are disbursed.
  • An eligible business can apply for an EIDL during the covered period that lasts through Dec. 31, 2021. EIDL proceeds can be used to cover working capital needs and normal operating expenses, including continuation of health care benefits, rent, utilities, and fixed debt payments.
  • These loans can be used to cover payroll, debts, accounts payable and other bills that can’t be paid because of the pandemic’s impact, and that are not already covered by a Paycheck Protection Program loan.
  • The SBA states that EIDL loan funds can’t be used to “pay off old debts, refinance another debt, or buy capital assets.” It also says to keep EIDL funds in a separate account so you can prove what those funds were used for, if requested.

An EIDL is a federal disaster loan for working capital for small businesses suffering substantial economic injury, in this case as a result of the COVID-19 pandemic.

EIDL applications are made directly through the SBA, rather than a bank or other lender.  Loans can be based on credit score and no first-year tax returns are required. No collateral is required for loans of $25,000 or less. For loans of more than $25,000, general security interest in business assets will be used for collateral instead of real estate. Borrowers must allow the SBA to review their tax records. Applications must meet SBA guidelines to qualify.

The SBA notes that “If you are seeking to apply for the new Targeted EIDL Advance (grant), please visit sba.gov/coronavirusrelief to learn more about eligibility requirements and how to access the next round of EIDL Advance funds.

For more details about coronavirus relief options, visit sba.gov/coronavirus.

The information in this article has been compiled from a variety of sources. It will be updated as necessary. Before making an EIDL application, it is recommended that you consult with your accountant, lawyer or tax advisor.