SBA Economic Injury Disaster Loan (EIDL) Program

By Bill Claffey, Esq., Partner, Tax Services
Mar 30, 2020

On March 6, 2020, the House passed and President Trump signed the Coronavirus Preparedness and Response Supplemental Appropriations Act (CPRSA ACT) allowing for the expansion of disaster areas to include those impacted by the Coronavirus.  On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) updating many provision of the existing SBA Economic Injury Disaster Loan Program (EIDL).  Below is a summary of the key provisions.  

Who is Eligible? 

  • Small businesses – this is measured by the Small Business Administration in its size standard index, however, all businesses with less than 500 employees are eligible.  The size standard index may allow for businesses with over 500 employees to qualify   
  • Non-profits pursuant to 501(c), (d), or (e) or faith based organizations (CARES Act expansion) 
  • Sole proprietorships and independent contractors (CARES Act expansion) 
  • Agricultural co-ops, aquaculture, nursery, or producer co-op meeting size standard index   

What are the terms? 

  • Up to $2m 
  • Up to 30 years 
  • 3.75% (for profit); 2.75% (non-profit) 
  • Loan deferral up to 1 year (however, interest accrues) 
  • Requires collateral for loans over $25k 
  • Prepayment generally allowed 
  • Administered directly through SBA 

How can I use the loan proceeds? 

  • Working capital 
  • Fixed debts 
  • Payroll (see interplay with PPP) 
  • Accounts payable 
  • Other bills that could have been paid had disaster not occurred 
  • Cannot be used for business expansion, capital equipment purchase 

How did the CARES Act Expand the EIDL Program? 

  • Waived personal guarantee for loans less $200k 
  • Waived requirement that business be in operation for 1 year prior to application; requires business be in operation as of January 1, 2020 
  • Waived ‘credit elsewhere’ provision 
  • Waived requirement to provide tax returns; lender may approve based solely on credit score 
  • Expanded eligibility to all non-profits, sole proprietors, and independent contractors 
  • Includes provision for Emergency Economic Injury Grants (see below) 

What Grants are available with the EIDL? 

  • Applications filed between January 31, 2020 through December 31, 2020 of EIDL loans may request an Emergency Economic Injury Grant (EEIG) of $10k for the following purposes: 
    • Providing paid sick leave employees unable to work due to Covid-19 
    • Maintaining payroll 
    • Meeting increased costs due to interrupted supply chains 
    • Making rent or mortgage payments 
    • Repaying obligations that cannot be met due to revenue losses 
  • EEIG’s will be received within 3 days of application.  
  • EEIG’s are not required to be paid back, even if EIDL application is denied.   

What is the interplay between the Paycheck Protection Program and other SBA Programs? 

  • Applicants can apply for other SBA loans including 7(a) loans, 504 loans, microloans and EIDL (Disaster Loans) and Paycheck Protection Program loans, however, borrowers cannot use the PPP loan for the same purpose.   
  • EIDL loans received between January 1, 2020 and June 30, 2020 may be refinanced into PPP loans.  If an Emergency Economic Injury Grant is allowed, such amount will be subtracted from the forgivable portion of the PPP loan.  

How do I apply?