As you may know, the Economic Injury Disaster Loan (EIDL) program is an existing Small Business Administration (SBA) disaster loan program. The CARES Act, signed in late March 2020, established several new programs providing economic relief to businesses and nonprofits affected by the COVID-19 pandemic, as well as expanded the already-existing EIDL program (EIDL 2020).
Just as quickly as the CARES Act was issued, the funds set aside for the EIDL 2020 program ran out.
Take two: EIDL grant program
During late December 2020, the Consolidated Appropriations Act 2021 (the Act) was signed, extending the EIDL program to December 31, 2021, adding $20 billion of funding, modifying the requirements to targeted entities and repealing the EIDL advance deduction (EIDL 2021).
What are the eligibility requirements for the EIDL 2021 grants?
The eligibility requirements for the EIDL 2021 grants remain the same as the EIDL 2020 grants, with a few changes.
Eligible entities qualify for the EIDL 2021 grants if they meet the following requirements:
- The entity has been in operation since at least January 31, 2020
- The entity employs not more than 300 employees (down from 500 employees), or is a private nonprofit organization or a small agricultural cooperative
- The entity has been directly affected by the COVID-19 pandemic
- The entity is located in a low-income community (new requirement)
- The entity has suffered an economic loss greater than 30% (new requirement)
Many nonprofits may check the boxes above since they tend to run lean operations, are situated in the low-income communities they serve and have been hit hard by the COVID-19 pandemic.
A low income community is defined in Section 45D(E) of the Internal Revenue Code of 1986 as:
“… 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 also additional ways areas may qualify as a low-income community, as described further in Section 45D(E) of the Internal Revenue Code of 1986. While we are still waiting for further guidance from the SBA regarding this program, you may use the census mapping tool here to give you a sense of your community’s income level.
The term 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.” If the eligible entity is a seasonal business, the SBA will develop a formula to determine the economic loss for seasonal businesses.
What are the allowable expenses?
The EIDL grant can be used to cover most operating expenses, including maintaining payroll to retain employees during business interruptions or substantial slowdowns, providing paid sick leave to employees unable to work due to the direct effect of COVID-19, meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains, making rent or mortgage payments and repaying obligations that cannot be met due to revenue losses.
How much could your grant be?
An eligible entity, after submitting a request to the SBA, shall receive $1,000 per employee or a cap of $10,000. You do not need to repay these grants. The EIDL 2021 grants are available to organizations even if they were turned down previously or were locked out because funds were exhausted. However, amounts previously received under the EIDL 2020 grant program will be deducted from the amounts awarded under the EIDL 2021 grant program.
Some other items worth noting: These EIDL grants are not taxable and no longer will be deducted from PPP for loan forgiveness purposes as they were under the CARES Act. Businesses that receive an EIDL grant will also not be denied tax deductions for qualified expenses paid for with EIDL grant funds.
When will I be able to apply for my grant?
Because only prior applicants will be considered for the Targeted EIDL Advance, applicants do not need to submit a second EIDL application. The SBA will reach out to those who qualify.
Wipfli can assist your organization
If you need assistance understanding your EIDL eligibility or applying for an EIDL, contact Wipfli. Our industry specialists are able to answer questions unique to your organization’s situation and guide you through the process of obtaining an EIDL.
For more information on the Consolidated Appropriations Act, EIDL, PPP2 and other COVID-19-related topics, visit our COVID-19 resource center.