The Economic Injury Disaster Loan program (EIDL), run under the Small Business Association, isn’t new. But it’s getting quite a workout as we navigate the economic ramifications of the coronavirus pandemic. The CARES Act, the $2.2 trillion economic stimulus package signed into law on March 27th, beefed up the benefits available under the program, while expanding eligibility.
This program provides assistance in the form of low-interest loans to businesses, renters and homeowners located in areas affected by declared disaster areas. Small business owners in all 50 U.S. states, the District of Columbia and all U.S. territories are eligible to apply.
These loans are not intended to replace lost income or revenue to the business. These are meant simply to keep qualifying businesses, as well as self-employed individuals, independent contractors and sole proprietorships afloat during the period of time affected by the crisis.
To qualify for coronavirus-related aid, the borrower must have been in business as of January 31st, 2020, and have suffered economic injury related to the pandemic.
Businesses with access to credit from other sources are not eligible for the SBA’s EIDL program. However, they may be eligible for the Paycheck Protection Program loan.
You are not eligible for EIDL assistance if one or more of the following circumstances apply:
60 days delinquent on child support;
The CARES Act authorized the SBA to waive or streamline a number of its normal EIDL underwriting and processing requirements in order to get funding out fast. At press time, here are the latest underwriting rules and requirements.
The Economic Injury Disaster Loan program isn’t new — but the EIDL Emergency Loan Advance program is!
The Emergency Loan Advance program was created by the CARES Act, the massive coronavirus aid and stimulus package for businesses and workers that was signed into law on March 27th, 2020.
The EIDL Emergency Loan Advance Program provides for an emergency advance of up to $10,000 to qualifying small businesses, including sole proprietors, independent contractors and self-employed individuals.
Be prepared to submit a profit and loss statement for the period January 31st, 2019 to January 31st, 2020.
If you’ve frozen your credit report, you’ll need to unfreeze it while you apply.
If you’re applying for an EIDL loan for another disaster, unrelated to the coronavirus, click here.
You cannot receive a Paycheck Protection Program loan in addition to an Economic Injury Disaster Loan through the SBA for the same purposes. However, if you have an EIDL loan unrelated to COVID-19, you may still apply for a Paycheck Protection Plan loan.
If you took out an Economic Injury Disaster Loan (EIDL) between Feb. 15 and June 30, 2020, and used the proceeds for payroll, you are required to use any funds received to refinance that loan into a Paycheck Protection Program loan.
Refinancing may be advantageous, even if not required, since the interest rate on PPP loans is 1%, while EIDL loans charge 3.75% (2.75% for non-profit borrowers). However, you should carefully check repayment terms, as EIDL allows for much longer repayment periods.
Also, be aware that PPP loan amounts used to pay wages and benefits to employees, rent, mortgage interest and/or utilities for your place of business are forgivable. EIDL loan proceeds, except for the $10,000 Emergency Loan Advance funds, must be repaid.
Any emergency EIDL Emergency Loan Advance received will be subtracted from any amount forgiven under the Paycheck Protection Program. That is, you cannot ‘double-dip’ both programs for the same expenses.
Applicants can have an existing SBA Disaster Loan and still qualify for
an EIDL for this disaster, but the two loans cannot be consolidated together.
For more information, call the SBA at 1-800-659-2955. However, you can expect the switchboard to be overwhelmed, as the SBA is scrambling to keep up with demand at press time. You can also email firstname.lastname@example.org.
JFDI Accountants is here to help you through this challenging time. If you require additional assistance or guidance, email us as soon as possible at WeCare@JFDIAccountants.
We look forward to serving you.