Qualifying requirements outlined for second round of Economic Injury Disaster Loan program

BY GERRI DETWEILER

Update Jan. 20: The Economic Aid Act, signed Dec. 27, includes additional funding for Economic Injury Disaster Loan program. This article includes information about the targeted EIDL grant application process provided by the Small Business Administration.

Gerri Detweiler

Gerri Detweiler is a leading, nationally recognized financing and credit expert, with more than 20 years of experience. During the 2008/2009 financial crisis, Detweiler was interviewed hundreds of times, providing insightful expertise and actionable advice for traversing the turbulent landscape and unknown change. Today, she is education director for Nav, the trusted financing partner of more than 1.2 million businesses, where she gives Nav’s customers certainty in an uncertain world through expertise and actionable advice.

Congress has allocated another $20 billion in EIDL grants [advances] in the new stimulus bill.

By way of background, the CARES Act that was passed March 27, 2020, included a grant [or advance] for those who applied for an EIDL loan due to the COVID-19 crisis, in the amount of up to $10,000. The SBA later determined that those grants would be $1,000 per employee. In addition, the funds available for grants were exhausted before all eligible businesses received them. This legislation appears to help address some of these concerns.

Worth noting: Businesses that applied for an EIDL — even earlier in 2020 — and meet the qualifications may receive the full $10,000 grant, minus any amount already received.

If you are not familiar with Economic Injury Disaster Loans [EIDL] and grants due to the COVID-19 crisis, we recommend you read this article.

Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs or financial advisers. To review your real-time funding options, please contact a Nav lending expert.

Do I qualify for the new Targeted EIDL Advance [grant]?
This legislation includes a new Targeted EIDL Advance [grant] described under the section Targeted EIDL Advance For Small Business Continuity, Adaption, and Resiliency and Congress has allocated $20 billion for these grants. They are an extension of the emergency EIDL grants in the CARES Act, but the requirements are somewhat different.

Important: Only businesses that previously applied for an emergency EIDL advance [grant] and meet the new criteria will be eligible for the Targeted EIDL advance [grant].

To qualify for the full $10,000 targeted EIDL grant, a business must:

• Be located in a low-income community; and
• Have suffered an economic loss greater than 30%; and
• Employ not more than 300 employees.

In addition, the business must qualify as an eligible entity as defined in the CARES Act:

• A small business, cooperative, ESOP Tribal concern, with fewer than 500 employees;
• An individual who operates under as a sole proprietorship, with or without employees, or as an independent contractor; or
• A private non-profit or small agricultural cooperative;
• The business must have been in operation by Jan. 31, 2020;
• The business must be directly affected by COVID-19.

Economic loss is defined as “the amount by which the gross receipts of the covered entity declined during an eight-week period between March 2, 2020, and Dec. 17, 2021, relative to a comparable eight-week period immediately preceding March 2, 2020, or during 2019. The SBA will develop a formula for seasonal businesses. SBA states that potentially eligible applicants will be asked to provide gross monthly revenue [all forms of combined monthly earnings received, such as profits or salaries] to confirm the 30% reduction.”

A low income community is defined in Section 45D[e] of the Internal Revenue Code of 7 1986 as follows:

The term low-income community means any population census tract if the poverty rate for such tract is at least 20% or in the case of a tract not within a metropolitan area, the median family income for such tract does not exceed 80% of statewide median family income, or in the case of a tract within a metropolitan area, the median family income for such tract does not exceed 80% of the greater of statewide median family income or the metropolitan area median family income. [There are additional ways areas may qualify as a low-income community in the legislation.]

This census tool may help you understand if your business is in one of these areas. However, we recommend you do not rely on it to determine if you qualify until we get guidance from the SBA. The SBA states that “additional details on how SBA will identify low-income communities will be available soon on www.sba.gov/coronavirusrelief.”

Are EIDL grants taxable?
Good news: The legislation clarifies that EIDL grants are not taxable, that businesses who receive them will not be denied a tax deduction for qualified expenses paid for with those funds, and that EIDL grants will not be deducted from PPP for loan forgiveness purposes.

How do I apply for these new targeted EIDL grants?
Only applicants who previously applied for an EIDL advance and received less than $10,000 or did not receive a grant because funds were exhausted will potentially qualify for this grant. There is nothing you can do until you are notified by the SBA that you may qualify.

Important: Check your spam folder for email from the SBA and watch out for scams. The SBA will be contacting previous applicants directly via email in the coming weeks with instructions to determine eligibility and submit documentation.

The SBA advises: All communications from SBA will be sent from an official government email ending with @sba.gov. Please do not send sensitive information via email to any address that does not end in @sba.gov.

Any EIDL grant, not a loan, previously received will be subtracted from the $10,000 EIDL grant.
SBA will first reach out to EIDL applicants that already received a partial EIDL Advance [i.e., between $1,000 - $9,000]. After that, it will reach out to those who applied for EIDL assistance on or before Dec. 27 but did not receive an EIDL advance because funds were exhausted.

Will I have to reapply if I received an EIDL grant for less than $10,000?
If you already applied for an EIDL loan or grant, the SBA will reach out to you directly with more information about how to apply for the full grant if you qualify based on location in a low-income community. You will be required to demonstrate the 30% reduction in revenue. The SBA advises that all applicants may be asked to provide an IRS Form 4506-T to allow SBA to request tax return information on the applicant’s behalf.

Do not fill out a new EIDL application if you applied before. It will only create a duplicate application.

Can I reapply or get a second EIDL loan?
It does not appear you can get a second EIDL loan. However, if you already applied for an EIDL loan and were not approved, or if you need additional loan funds, you have six months from the date of the decline letter to apply for reconsideration. Do not fill out a brand new application; it is just going to result in a notification that your application is a duplicate.

Send your reconsideration request to [email protected] If you prefer to mail it, send it to: Small Business Administration Disaster Assistance Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, Texas, 76155. Include your application number and any information you may have that will help overcome the reason for decline.

What if I never applied for EIDL?
If you have not previously applied for EIDL, you may apply at SBA.gov. You will be able to apply for the low interest rate EIDL loan through Dec 31, 2021, as long as funds are available.

However you will not be considered for an EIDL advance [grant] at this time.

Can I also apply for a Paycheck Protection Program loan?
Yes. In addition to the EIDL grants, your business may qualify for a PPP loan. These loans may be fully forgiven if they are spent on the right expenses [primarily payroll] which, essentially, turns them into a grant. Businesses may apply for both PPP and EIDL if they qualify.

Where can I get help filling out the EIDL application?
You can connect with your local SBA resource partner such as SCORE, Small Business Development Center or Women’s Business Center. Many are providing free help and education for EIDL grants and loans. Find local assistance at SBA.gov/tools.

This article originally appeared on Nav.com.

See the original article in the print publication


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