Among all the talk of this and that SBA loans to help business activities, we thought we’d cut through the clutter of acronyms. For background information, read this post first to understand the basics.
First of all, an EIDL (Economic Injury Disaster Loans) isn’t new. It’s an existing program administered through the Small Business Administration (SBA). However, the stimulus bill (also called the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act) has expanded the program.
To be eligible for the program, a business must have no more than 500 employees.
The question often arises, what about my self-employed business operated from my home? Home office or not, you are eligible. Sole proprietorships, independent contractors, and self-employed individuals are eligible for the EIDL program.
In order to qualify, you have must have suffered a substantial economic injury and be located in a presidentially-declared disaster area. However, on March 13, 2020, the President of the United States issued an emergency declaration. This means the entire country has now been declared a disaster area, and that means that virtually any small business in the United States can consider a loan.
Dollar amounts of the loan can vary – a lot. The maximum loan amount is $2 million. Loans are based on your “actual economic injury” as determined by the SBA, less any recoveries such as insurance proceeds. If you decide that you need more money, you can, under some circumstances, ask for an increase in the loan amount within the two years following your initial loan approval.
Given the above definitions, you can ask for an emergency grant advance of up to $10,000 – the SBA says that you can get these in as little as three days (like most governmental promises this is vastly overstated). The loan advance will be forgiven if it is spent on paid leave for employees, other payroll, mortgage, or lease payments.
Does government money equal government restrictions?
Of course – it always does, but they are not too bad in this case. You can’t use an EIDL to refinance pre-existing debt or pay dividends, but you can use the money for payroll, rents or mortgages, and certain other operational costs. As with the Payroll Protection Plan, you can’t double-dip: no using funds for qualified sick and family leave wages if you’re taking a tax credit for those costs under the Families First Coronavirus Response Act.
Two onerous SBA historical requirements (collateral and a personal guaranty) are waived for loans under 25k and 200k, respectively.
Although the PPP (Payroll Protection Plan) loans must be broked through an SBA-approved bank, the EIDL loans are a DIY project that can usually be done in 30 minutes.
Click the link below if you’d like to start the process.
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He is also a founding Board Member and Finance Director of the Fayette Pregnancy Resource Center and serves on the Board of the National Equal Rights Institute.