Everything you need to know about the new EIDL Grant

4 min read

Executive Summary

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Economic Injury Disaster Loan (EIDL) program is designed to provide economic relief to businesses that are currently experiencing a temporary loss of revenue due to the Covid-19 pandemic.

On December 27, 2020, White House signed the new stimulus bill that allocates another $40 billion for the EIDL program which includes new EIDL grants (advances). The U. S. Small Business Administration (SBA) is currently accepting new EIDL loans. The SBA also says that the EIDL grant applications will be available by TBA.

In the first round, the EIDL grant was distributed on the basis of $1,000 per employee and capped at a maximum of $10,000 per business. The allocated funds for the grants were also exhausted before all eligible businesses received them. The latest legislation addresses the fund shortage and provides the full $10,000 for eligible businesses, regardless of the employee count.

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Do I qualify for the new targeted EIDL grant?

Under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, $20 billion is also appropriated for a new targeted EIDL SBA 7(b) loan program. This program provides $10,000 in advance payment to businesses that:

  • Have suffered a revenue loss greater than 30% over specified time periods,
  • Are located in low-income communities,
  • Employ no more than 300 employees, and
  • Have been in operation before January 31, 2020

Businesses must also meet the eligibility requirements as defined in the CARES Act which includes small businesses, private non-profit organizations, and small agricultural cooperatives, start-ups, cooperatives, and eligible ESOPs (employee stock ownership plans), sole proprietors, and independent contractors.

Economic loss is defined in Section 331 of the Act 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.”

However, Section 331 of the Act does not specify how a particular 8 week period is to be selected for measurement, or by whom. Further guidance by the SBA will reveal more details. If your business is a seasonal business concern, then the loss amount is determined by the SBA.

Who does not qualify for the EIDL grant?

Public non-profit organizations and several specific business types are not eligible for EIDL assistance. Ineligible businesses include, but are not limited to, the following:

  • Businesses that do not meet the SBA’s small business eligibility criteria, including the SBA’s size standards;
  • Businesses that derive more than one-third of their annual gross revenue from legal gambling activities;
  • Casinos and racetracks;
  • Religious organizations;
  • Political and lobbying concerns;
  • Government-owned concerns (expect for businesses owned or controlled by a Native American tribe); and
  • Businesses determined by the SBA to have credit available elsewhere.

How Do You Know If You're in a Low-Income Community?

According to the IRS rules (Section 45D (e) Internal Revenue Code of 7, 1986), the term “low-income community” refers to an area (census tract or metropolitan area) that has:

  • A population with poverty rate of over 20%, or
  • Median family income is less than 80% of state-wide median household income

Is EIDL grant taxable?

This legislation confirms that EIDL grants will not be taxed. If you used the grant to pay for qualified expenses, you will be allowed a tax deduction.

What is the amount of the new EIDL grant?

The new EIDL grant makes a sum total of $10,000 available to qualified businesses. Previously, the grant was allocated for $1,000 per employee and the $10,000 sum was set as the ceiling amount.

Do I need to repay the EIDL grant?

You are not required to repay the advance payment, even if subsequently denied an EIDL loan. The funds may be used for any eligible EIDL expense, including, among other expenses, providing paid sick leave to employees unable to work due to COVID-19, maintaining payroll to retain employees, and meeting increased costs to obtain materials due to supply chain disruptions. This makes it a great option for struggling businesses who need COVID-19 relief.

If I got the first EIDL grant, can I apply again?

Yes, if the EIDL grant received previously is less than $10,000. If you meet the requirements and have previously received the advance payment, you are eligible to receive the difference of what you received and $10,000.

The SBA will provide first priority in awarding the grants to eligible borrowers located in low-income communities that received an Emergency EIDL advance payment of less than $10,000 previously. Second priority goes to eligible first-time applicants located in low-income communities.

Can I also apply for the PPP loan?

Yes. You may apply for both the PPP and EIDL if your business qualifies. The PPP loan may be fully forgiven if they meet the qualified expenses criteria (at least 60% of loan amount on payroll, and business expenses make up less than 40%).

Click here to apply for the PPP loan in minutes.

How do I apply for an EIDL grant?

According to the National Federation of Independent Business (NFIB), the SBA has said that the EIDL grant (advance) application will be made available by TBA. Applications can be made through SBA’s online portal.

The covered period for EIDL advance payments has been extended from December 31, 2020, to December 31, 2021. The SBA has 21 days from the date of application to approve and disburse the funds.

About the author

Dexter Lam

Written by Dexter Lam

Dexter is the Growth Strategy Manager at Flowcast and Tillful. Living at the intersection of finance and technology, he is focused on building processes that enable business owners to more effortlessly gain access to financing and credit.

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