What nonprofits need to know about emergency Economic Injury Disaster Loans (EIDLs)

As of April 16, the SBA reported that it has exhausted Economic Injury Disaster Loan funding. EIDL applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.

Signed into law on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains relief in the form of a loan called the Economic Injury Disaster Loan (EIDL). The CARES Act also provides advances on these loans in the form of a grant of up to $10,000.

EIDLs are available to small businesses and nonprofit organizations that have suffered a substantial economic injury as of result of COVID-19. The loans and advances are intended to be used for payroll, rent and mortgage payments, as well as cover increased costs from supply chain disruptions and other expenses arising due to the crisis.

Who can apply for an EIDL?

A wide range of organizations can benefit from this opportunity, including most private non-profits, 501(c)(19) veterans organizations, faith-based organizations and tribal businesses (sec. 31(b)(2)(c) of Small Business Act) with under 500 employees, that have suffered substantial economic injury as of result of the crisis. 

An additional requirement to apply for the emergency grant and loans is that the organization must have been in business as of January 31, 2020.

Getting into the nitty-gritty EIDL details

Before your organization decides to apply, there are some details to be aware of:

• The CARES Act waives the requirement to seek credit elsewhere before applying for EIDLs.
• The loans are available based on the applicant’s credit score.
• There is no need to submit a tax return.
• There is no collateral necessary for loans less than $25,000. For loans from $25,000-$200,000 a general security interest in business assets maybe used.
• Applicants can be approved for loans up to $200,000 without a personal guarantee.
• The maximum loan amount is $2 million.
• If requesting the advance, the applicant must self-certify on penalty of perjury that it is eligible for an EIDL. The advance must be used for EIDL purposes and should be disbursed within three days of requesting the advance.
• The loan interest rate for nonprofit organizations is 2.75%, and loans have maturities up to 30 years.
• Payments on the loan may be deferred for one year; however, interest still accrues during this time period.

How does the Paycheck Protection Program factor into EIDLs?

If, after applying for an EIDL, the applicant subsequently applies for a Paycheck Protection Program (PPP) loan, the EIDL will be refinanced into its PPP loan, and the advance will reduce the forgivable portion of the PPP. EIDLs are not forgivable except for the $10,000 advance grant. If the EIDL is denied, the $10,000 grant does not have to be returned, but it does need to be spent on EIDL purposes. 

If your organization is considering applying, you can do so at covid19relief.sba.gov. If you need assistance going over EIDL requirements or considering whether the PPP is a better option for your organization, contact Wipfli. We’ve also put together a COVID-19 resource center to help organizations navigate COVID-19’s impact.