By: Grayson T. Orsini

The Paycheck Protection Program (or “PPP”) has received a lot of recent coverage in the news. But what is often overlooked is the CARES Act’s allocation of $ 10 billion for emergency grants under the Economic Injury Disaster Loan (or “EIDL”) program. PPP loans and EIDL grants are the main way that businesses can receive funding under the CARES Act. Below is what business need to know about emergency EIDL grants.

  • For 2020, any eligible entity with 500 employees or fewer applying for a EIDL loan can ask for an advance of up to $10,000.00.

  • The entities eligible for emergency EIDL grants are:
    • businesses with no more than 500 employees,
    • individuals operating as sole proprietorships, or independent contractors,
    • ESOPs with less than 500 employees,
    • tribal small business concerns with less than 500 employees, and
    • cooperatives with no more than 500 employees.

  • Congress also waived some of the traditional requirements for receiving EIDL grants, such as the rule that a business must be in operation for 1 year, and all rules related to personal guarantees on advances of $200,000.00 or less. However, businesses must have been in operation as of January 31, 2020.

  • The documents required to receive such a loan are lax. A business may be approved to receive an advance of up to $10,000 based solely on its credit score, or any other appropriate method. A business applying for a grant is not required to submit a tax return or a tax return transcript.

  • If a business is approved for a grant, it could receive funds within three days of approval. Funds can be used for any purpose that a traditional EIDL loan can be used for, including:
    • sick leave to employees as a result of COVID-19,
    • maintaining payroll during business disruptions or slowdowns,
    • extra costs due to interrupted supply chains,
    • rent or mortgage payments, and
    • other obligations that cannot be met due to revenue losses.

  • Successful applicants do not have to repay the advance. This is true even if a business is denied a loan under the traditional EIDL program.

  • Businesses can still apply for a traditional EIDL loan of up to $ 2 million. However, businesses will still have to pay that amount back. Despite this, EIDL loans and grants can be used to cover more types of expenses than PPP loans.

  • If a business receives an EIDL advance, and transfers into, or is approved for a SBA 7(a) loan (such as a PPP loan), the advanced is reduced from the loan amount forgiven under the 7(a) program.

Emergency EIDL grants are a good option to provide quick relief for businesses struggling to stay afloat. Businesses may also consider traditional EIDL loans if their fiscal needs will not be met with a PPP loan. Feel free to reach out to an attorney at Wolcott Rivers Gates to see if you qualify for an SBA relief program.