With the passage of the interim bill that provides an additional $60 billion in funding, the Small Business Administration’s (SBA’s) Economic Injury Disaster Loan (EIDL) program is processing applications again – though it is accepting new ones only from agricultural businesses. The first stimulus package had relaxed requirements, expanded eligibility and authorized $10,000 advances that can be forgiven. These changes to the EIDL program are just some of the ways the government is seeking to help small businesses struggling during the coronavirus pandemic. Read on to learn more about EIDLs and EIDL program grants.
What Is the Economic Injury Disaster Loan (EIDL) Program?
The SBA offers EIDLs to eligible small businesses and organizations that have been affected by natural or economic disasters. Due to the COVID-19 global pandemic, eligibility for EIDLs has been extended to any small business with fewer than 500 employees affected by the outbreak. Other eligible organizations include nonprofits, tribal businesses, cooperatives, employee stock ownership plans (ESOPs), sole proprietors, independent contractors – and now agricultural enterprises.
An EIDL loan can range up to $2 million (though some sources have reported that the SBA is unofficially capping loans at $150,000.) With an EIDL, the maturity term can be up to 30 years. Interest rates for these loans may be as high as 3.75% for companies and 2.75% for nonprofits. In addition, an EIDL’s principal and interest payments may be deferred for up to one year.
How Is an EIDL Grant Different from an EIDL Loan?
While an EIDL business loan can be for as much as $2 million (usually) and must be repaid, the EIDL advance is for up to $10,000 and completely forgivable, making it a grant. The $10 billion provided by the CARES Act for these grants was quickly depleted and the new bill replenishes SBA coffers with another $10 billion just for these grants.
A business doesn’t actually need to be approved for an EIDL loan to be eligible to receive an EIDL advance. As long as your business is eligible for the program in general, you’ll receive an EIDL advance about three days after you apply for it.
If the EIDL advance is forgiven and becomes a grant, it does not need to be repaid. As long as a business uses the funds to cover payroll, paid leave for employees, healthcare costs, operating expenses and anything else related to the COVID-19 pandemic, the advance is forgiven and no repayment is required. The grant is primarily meant to help businesses maintain their workforce.
Having a strong financial plan in place can help to ensure your business survives these difficult times. Talk to a financial advisor today.
What Organizations Are Eligible for an EIDL Grant?
Every company that’s eligible for the EIDL program is eligible to receive an EIDL grant. Companies and organizations must have been in business by Jan. 31, 2020 in order to be eligible. The list of eligible organizations has been expanded to include businesses with less than 500 employees, nonprofits, tribal businesses, cooperatives, employee stock ownership plans (ESOPs), sole proprietors, independent contractors and agricultural enterprises (businesses engaged in the legal production of food and fiber, ranching, raising of livestock, aquaculture and all other farming- and agriculture-related industries).
There are a handful of disqualifying factors for the EIDL program, including if the business:
- Engages in illegal activity
- Earns revenue from sexual depictions or products
- Earns more than one third of its annual revenue from gambling activities
- Is a government entity
- Is a lobbying organization
How to Apply for and Receive an EIDL Grant
Since any company that’s eligible to receive an EIDL loan is eligible for a grant, the process of getting the up to $10,000 advance for your business is relatively straightforward. Once and if the program reopens, you can simply go to the SBA’s disaster loan assistance page and fill out an application.
Here, you’ll have to note what kind of business or organization you are, while ensuring that you are not disqualified for any of the reasons above. After that, you’ll enter some basic information about your business, such as its address, the names of owners, annual revenue, number of employees and operating expenses.
On the final page of the application, you’ll need to select that you’d like to receive an advance of up to $10,000. You must also enter your bank account information so that the funds can be direct deposited right to your account. (Before the SBA closed the EIDL program to new applications, it was restricting advances to $1,000 per employee, up to $10,000 – which means you have to have at least 10 employees to get the full amount. The SBA has yet to announce whether it will apply this restriction to the new round of funding.)
You’ll likely have to let your application process for 18 to 21 days, with another two to five days needed before the SBA will physically disperse the funds into your account. However, your EIDL advance should get to you within about three days of applying.
In theory, accessing the up to $10,000 EIDL grant for your small business is a relatively easy task. (In practice, if you haven’t already submitted your application, you’ll likely need to wait for Congress to approve sufficient funding for the program to reopen.) As long as you’re eligible to receive an EIDL loan, you can submit an application and get your advance within a few days. The application process is straightforward and eligibility requirements are fairly simple. This grant is one of several provisions in the CARES Act that are designed to help businesses and organizations handle the economic fallout from the coronavirus outbreak.
Tips for Small Business Planning
- A financial advisor can help you keep your business’ finances in order during tumultuous times. Based on the needs of you, your family and your business, SmartAsset’s free tool can match you with financial advisors in your area in just five minutes. Get started now.
- There are many resources available for small businesses, including the Paycheck Protection Program (PPP), the Express Bridge Loan Pilot Program and the SBA 7(a) Loan program. Make sure you take advantage of everything that your business might qualify for.
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