Congress has allocated another $20,000,000,000 in EIDL grants (advances) in the new stimulus bill. If the President signs the legislation, new EIDL grants will become available. It appears these grants are meant to fill a gap for businesses that may not have received the full $10,000 EIDL grants described in the CARES Act.
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. Many business owners felt cheated. In addition, the funds available for grants were exhausted before all eligible businesses received them. This new legislation appears to fix these problems.
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, Ayala, Vado & Associates, and/or Financial Advisors. To review your real-time funding options with one of Ayala, Vado & Associates are the lending experts, please contact us- firstname.lastname@example.org and/or 202-667-9473- please be advised we are experiencing a severely high call volume and are working under restrictive protocols as deemed by Mayor Muriel Bowser. We ask and thank you kindly for your patience in advance.
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.
How do I qualify for the new EIDL grant? To qualify for the full $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 300 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.
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.)
Are EIDL grants taxable? Good news! The new 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.
What else do I need to know? According to the legislation, the SBA will have 21 days after receiving the business owner’s request to verify whether the business qualifies and, if so, to provide the advance. This program extends through December 31, 2021.
How do I apply for these new EIDL grants? First, the President must sign the legislation so it becomes law. After that happens, the SBA will release guidance and will open up the application portal at SBA.gov. We will monitor the news from the Small Business Administration and will update this article when that information is available. In addition to the EIDL grants your business may qualify for a new PPP loan.