Updated EIDL Grant Information

The President has signed the stimulus bill that includes the more funding for Economic Injury Disaster Loan (EIDL) grants. The next step is for the SBA to issue guidance and instructions. 

Congress has allocated another $20,000,000,000 in EIDL grants (advances) in the new stimulus bill. 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 due to the COVID-19 crisis, 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. This legislation appears to help address these concerns.

Worth noting: Businesses that applied for an EIDL— even earlier in 2020– and meet the qualifications may receive the full $10,000 grant (minus any amount already received) even if their EIDL applications were not approved.

If you are not familiar with Economic Injury Disaster Loans (EIDL) and 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.

How do I qualify for the new targeted EIDL grant?

This legislation includes a new EIDL grant described under the section “Targeted EIDL Advance For Small Business Continuity, Adaption, and Resiliency” and Congress has allocated $20 billion for these grants. They are an extension of the emergency EIDL grants in the CARES Act, but the requirements are somewhat different.

To qualify for the full $10,000 targeted 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 develop a formula for seasonal businesses. We do not yet know how the SBA will require those who apply to document economic loss but we will update this story when we learn more.

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 additional ways areas may qualify as a low-income community in the legislation.)

This Census tool may help you understand if your business is located in one of these areas. 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 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. 

How do I apply for these new targeted EIDL grants?

We are awaiting instructions from the SBA on how to apply for the grants.

You may apply for an EIDL loan if you have not done so before. An email from the SBA states that it will begin to switch to a new online Disaster Loan Assistance Portal on Friday, January 15, 2021 and expects the switch will be complete by Sunday, January 17, 2021. This portal is for the EIDL loan, not the grant. 

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 will monitor the news from the Small Business Administration and will update this article when that information is available. 

This legislation extends this program through December 31, 2021.

Will I have to reapply if I got an EIDL grant for less than $10,000? 

If you already applied for an EIDL loan or grant, it appears the SBA will reach out to you directly with more information about how to apply for the full grant—regardless of whether you were approved for the loan or grant in the past.

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.

Can I apply for a second EIDL grant?

If you received the full $10,000 EIDL grant the first time around, it does not appear you can get a second grant. However, we will monitor the guidance and update that if needed. 

If you did not get the full $10,000 grant (or received no grant) the first time around, then you may be eligible for this round of targeted grants. Again, we’ll wait for further guidance from the SBA. 

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 pdcrecons@sba.gov. 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.  In addition, we anticipate you may be considered for the full $10,000 targeted EIDL grant but we do not have details on that process at this time. 

If you just want an EIDL grant but not a loan, understand that you do not have to accept an EIDL loan if you are offered one. Some business owners choose to accept the grant but not the loan and that is perfectly fine.

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.

How will I know when the SBA is accepting applications for the targeted EIDL grant?

You can monitor the SBA’s website at SBA.gov or check back for updates to this article. In addition, if you sign up for a free Nav account we will provide updates in our newsletter.  You can also stay up to date by following the SBA on Twittersubscribing to SBA’s e-newsletter, and visiting www.SBA.gov.

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/tools.

About the Author(s)

 Gerri  Detweiler

Gerri Detweiler has more than twenty years of experience guiding individuals through the confusing world of credit, and has earned a reputation as a reliable and independent resource on personal and small business credit. She serves as Education Director for Nav, developing educational programs and content for small business owners.

Education Director, Nav