Updated March 15, 2021 to include new EIDL Targeted Advance funding in the American Rescue Plan
Congress has allocated another $15 billion in EIDL Targeted Advances (grants) as part of the American Rescue Plan signed by President Biden on March 11, 2021. This legislation includes a new $5000 grant for hardest hit businesses.
If you are not familiar with Economic Injury Disaster Loans (EIDL) or grants due to the COVID-19 crisis, we recommend you read this article first.
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 this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors. To review your real-time funding options with one of Nav’s lending experts, please contact us.
By way of background, 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 $10,000. The SBA later determined that those grants would be made in an amount of $1000 per employee. In addition, the funds available for grants were exhausted before all eligible businesses received them. The Economic Aid Act that passed December 27, 2020 included funding for Targeted EIDL grants, which may allow some of those business owners to get the full $10,000 grant.
The American Rescue Plan signed March 11, 2021 includes $10 billion in additional funding for these grants as well as another $5 billion to fund $5000 supplemental grants for businesses with ten or fewer employees that have suffered an economic impact of at least 50%.
Do I qualify for a Targeted EIDL grant?
Targeted EIDL advances (grants) are an extension of the emergency EIDL grants in the CARES Act, but the requirements are somewhat different.
Important: Only businesses that previously applied for an emergency EIDL advance (grant) and meet the new criteria will be eligible for the Targeted EIDL advance (grant).
To qualify for the full targeted $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
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. SBA states that potentially eligible applicants “will be asked to provide gross monthly revenue (all forms of combined monthly earnings received, such as profits or salaries) to confirm the 30% reduction.”
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.)
The SBA has released an online tool to help borrowers understand if they are in a low-income area, noting that “the business address must be located in a low-income community in order to qualify, so SBA encourages potential applicants to check the map to see if they meet the low-income community eligibility requirement before you apply.”
How do I demonstrate economic loss?
Getting your tax documents organized and up to date will be essential to applying for this grant and demonstrating you qualify.
In a recent FAQ document the SBA explains that “applicants who meet the low-income community criteria will be asked to provide gross monthly revenue for January 2019 through the most recent month-to-date period (all forms of combined monthly earnings received, such as profits or salaries) to confirm the reduction in revenue.
The SBA recommends that you get your tax filing completed as soon as possible because you will be required to provide your business’ monthly gross receipts for each month from January 2019 through the most recent month-to-date period. This information will be used to determine that your business meets the greater than 30 percent reduction in revenue requirement during an 8-week period beginning on March 2, 2020.
What are the new $5000 supplemental grants?
The American Rescue Plan includes $5 billion in funding for Supplemental Targeted Advances (grants) to hardest hit businesses. The legislation states these $5000 grants will be available to covered businesses that:
- Suffered an economic loss of greater than 50 percent; and
- Employ not more than 10 employees
It also states these grants will be “in addition to any any payment made” under the CARES Act or the Economic Aid Act. It appears these grants will only be available to businesses eligible for the Targeted Advance (in other words, also in a low-income community), but we must wait for guidance from the SBA to clarify exactly how this will work.
Are EIDL grants taxable?
Good news! Recent 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 a Targeted EIDL grant?
You do not start an application on the SBA website. The SBA will reach out to you by email to apply. As a reminder, only applicants who previously applied for an EIDL advance and received less than $10,000 or did not receive a grant because funds were exhausted will potentially qualify for this grant. There is nothing you can do until you are notified by the SBA that you may qualify.
Important! Check your spam folder for email from the SBA and watch out for scams. The SBA will be contacting previous applicants directly by SBA via email in the coming weeks with instructions to determine eligibility and submit documentation. The SBA advises:
All communications from SBA will be sent from an official government email with an @sba.gov ending. Please do not send sensitive information via email to any address that does not end in @sba.gov.
SBA has begun contacting EIDL applicants that already received a partial EIDL Advance (i.e. between $1,000 – $9,000). This process may take some time, so do not be alarmed if you have not yet received an email. After that it will reach out to those who applied for EIDL assistance on or before December 27, 2020, but did not receive an EIDL Advance because funds were exhausted.
Will I have to reapply if I got an EIDL grant for less than $10,000?
Again, the SBA will contact you by email. Do not fill out a new EIDL application if you applied before. It will only create a duplicate application.
If you already applied for an EIDL loan or grant, the SBA will reach out to you directly by email with more information about how to apply for the full grant if you qualify based on location in a low-income community. You will be required to demonstrate the 30% reduction in revenue. The SBA advises that All applicants may be asked to provide an IRS Form 4506-T to allow SBA to request tax return information on the applicant’s behalf.
Can I reapply or get a second EIDL loan?
It does not appear you can get a second EIDL loan. However, if you already applied for an EIDL loan and were not approved, or if you need additional loan funds, you have six months from the date of the decline letter to apply for reconsideration. Do not fill out a brand new application; it is just going to result in a notification that your application is a duplicate.
Send your reconsideration request to firstname.lastname@example.org. If you prefer to mail it, send it to: U.S. Small Business Administration Disaster Assistance Processing & Disbursement Center 14925 Kingsport Road FortWorth, Texas 76155. The SBA instructs you to include your application number and any information you may have that will help overcome the reason for decline.
What if I never applied for EIDL?
If you have not previously applied for EIDL, you may apply at SBA.gov. You will be able to apply for the low interest rate EIDL loan through December 31, 2021 as long as funds are available. However you will not be considered for an EIDL advance (grant) at this time.
Can I also apply for a Paycheck Protection Program (PPP) loan?
Yes! In addition to the EIDL grants your business may qualify for a PPP loan. These loans may be fully forgiven if they are spent on the right expenses (primarily payroll) which essentially turns them into a grant. Businesses may apply for both PPP and EIDL if they qualify.
Where can I get help filling out the EIDL application?
We recommend you connect with your local SBA resource partner such as SCORE, Small Business Development Center or Women’s Business Center. Many are providing free help and education for EIDL grants and loans. Find local assistance at SBA.gov/local-assistance.