eCONOMIC iNCOME DISASTER RELIEF (eidl) gRANT
Congress has allocated another $20 Billion in emergency EIDL grants (advances) in the new stimulus bill. Stemming from the CARES Act that was passed March 27, 2020 included a grant (or advance) for those who applied for an EIDL loan, in the amount of up to $10k. The SBA later determined that those grants would be made in an amount of $1000 per employee. Many business owners felt cheated. In addition the funds available for grants were exhausted before all eligible businesses received them. This new legislation appears to help address concerns.
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 our site as new information becomes available.
How do I qualify for the new emergency EIDL grant?
To qualify for the full emergency $10,000 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 January 31, 2020
The business must be directly affected by COVID-19
*It is not clear whether this requirement is reduced to 300 employees for new EIDL applicants. We are awaiting further guidance from the SBA.
Economic loss is defined as “the amount by which the gross receipts of the covered entity declined during an 8-week period between March 2, 2020, and December 17, 2021, relative to a comparable 8-week period immediately preceding March 2, 2020, or during 2019.” The SBA will come up with a formula for seasonal businesses.
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 percent, or in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.” (There are some additional ways areas may qualify as a low-income community in that reference.) This tool from Census may help you understand if your business is located in a low-income community. However, we recommend you do not rely on it to determine if you qualify until we get guidance from the SBA.
Are EIDL grants taxable?
Good news! The new 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. This applies to all EIDL grants, including those already received.
How do I apply for these new EIDL grants?
The legislation says that a qualified business (“covered entity”) may submit a request to the SBA Administrator and receive the full $10,000 EIDL grant regardless of whether their application for an EIDL “is or was approved,” they accepted an EIDL loan, or they previously received a PPP loan. Any EIDL Grant (not loan) previously received will be subtracted from the $10,000 EIDL Grant.
The SBA will be required to notify anyone who received a previous EIDL grant or who applied but did not receive one because funding was exhausted, that they may be able to apply for the full $10,000 grant.
If a business requests an EIDL grant, the SBA will have 21 days after receiving the request to verify whether the business is eligible. If eligible, the grant will be provided and if not, the applicant must be told why the SBA did not consider them eligible. It does not spell out the verification procedure other than to state that the SBA may request any documentation necessary, including tax records, even if that information has been requested before.
The legislation states the SBA will process applications in the order received, except that priority will be given to those who previously received an EIDL grant under the CARES Act, followed by those who did not receive a grant because funding was exhausted.
We do not know the procedure for requesting the full grant yet. We must wait for guidance from the SBA. We anticipate that will happen sometime in early January 2021. We will monitor the news from the Small Business Administration and will update this site when that information is available.
This legislation extends this program through December 31, 2023.
Will I have to reapply if I got an EIDL grant for less than $10,000?
The legislation requires the SBA Administrator to notify those who received a previous EIDL grant as well as those who applied but did not get a grant because funds were exhausted. It does not specify how that notice must be given. Until the SBA releases further guidance, we do not know a specific date when this will take place. We will update this article when more information is available from the SBA.
In addition to the EIDL grants your business may qualify for a new PPP loan.