By Jay L. Morse
The CARES Act expands eligibility for the Economic Injury Disaster Loan (EIDL) program to businesses employing 500 employees or less, until December 31, 2020. The SBA can provide up to $2 million in disaster assistance to a business. There are no upfront fees or early payment penalties charged by SBA. The repayment term will be determined by your ability to repay the loan but is capped at 30 years. Unlike the PPP loans, EIDLs cannot be forgiven. However, businesses that have already applied for or received an EIDL due to economic injury attributable to the COVID-19 pandemic can seek to refinance their EIDL under the PPP to take advantage of the PPP’s loan forgiveness. To qualify for an EID loan, a business must have suffered “substantial economic injury” from COVID-19.
An entity that has applied for an EIDL due to COVID-19 can request an advance on that loan in an amount of not more than $10,000, which the SBA must grant within three days. Applicants are generally not required to repay this advance, even if the EIDL is denied. However, the $10,000 will be deducted from any PPP loan forgiveness the applicant has received. This advance payment may be used for paid sick leave, payroll maintenance, meeting increased costs to obtain materials, rent/mortgage payments, and repaying obligations that cannot be met due to revenue loss. Note that a business cannot receive an EIDL and a PPP loan for the same purpose.
For more information regarding qualification for an EIDL and the Emergency Grants associated with the EIDL program, do not hesitate to ask.