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Last updated April 15th, 2020

 

The Economic Injury Disaster Loan (“EIDL”) Grant

Allowed uses:

  • Providing paid sick leave to employees unable to work due to the direct effect of the COVID–19;
  • Maintaining payroll to retain employees during business disruptions or substantial slowdowns;
  • 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.

*We have yet to see clarification on what constitutes “materials” and “obligations”

 

What you need to know right now:

  • The grant will provide $1,000 per employee (calculated based on your workforce as of January 31, 2020), up to $10,000. This recently changed from providing up to $10,000 to all businesses.
  • You can receive both this grant and the forgivable PPP loan (below). The EIDL can be used for some things that the forgivable PPP Loan can’t, and vice versa, so we recommend applying for both.
  • There’s no repayment; it’s a grant, not a loan, although it shares an application with an SBA loan so they can be applied for together.
  • How to apply: Go to https://covid19relief.sba.gov/#/
  • The funds are first-come, first-serve. Apply ASAP!

 

What we still don’t know:

  • When the money will actually arrive in your bank account. It was supposed to be provided to businesses within three days of applying, but people who applied two weeks ago haven’t seen it yet. As of April 14th, 2020, the latest news from the SBA is that the money will be released within three days after an application is processed.
  • Whether any additional changes will be made to the grant program. Case in point, the loan sum was originally $10,000 for all applicants; the new cap, $1,000 per employee, was added by the SBA on April 13, 2020.

 

Paycheck Protection Program (“PPP”) Loan

Allowed uses (at least 75% of the PPP funds must be used for payroll costs):

  • Payroll costs;
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • Mortgage interest payments (but not mortgage prepayments or principal payments);
  • Rent payments;
  • Utility payments;
  • Interest payments on any other debt obligations that were incurred before February 15, 2020; and/or
  • Refinancing an SBA EIDL loan (different from the grant described above)

This loan is forgivable, but ONLY if used for (with at least 75% being used for payroll):

  • Payroll costs (at least 75%);
  • Interest payments on any covered mortgage obligation (but not prepayments or principal payments on a covered mortgage obligation);
  • Any payment on any covered rent obligation;
  • Any covered utility payment.

 

What you need to know right now:

  • If you receive a PPP loan and an EIDL grant (described above), the forgivable amount of the PPP loan will be reduced by the amount of your grant. For example, if you received an EIDL grant for $10,000 and a PPP loan for $25,000, a maximum of $15,000 of the PPP loan will be forgivable.
  • The SBA has been adding restrictions of their own on top of CARES Act. While the original text of the law didn’t require 75% of funds to be applied to payroll and may have included payments to independent contractors as part of those costs (the language was vague), the SBA subsequently issued a rule that such payments are not considered payroll for the purposes of loan forgiveness and introducing the 75% stipulation.
  • If not forgiven, the PPP loan will be repaid at 1% interest.
  • How to apply: submit this form to an eligible lender (most banks are eligible lenders)
  • It’s on a first-come, first-serve basis[1]

 

What we still don’t know:

  • Whether the loan can be used to pay independent contractors at all, even if these payments aren’t forgivable. The CARES Act includes “the sum of payments of any compensation to or income of a sole proprietor or independent contractor”[2] in payroll costs, but the SBA rule omits this language and rewords it to state that these are amounts that the independent contractor apply for themselves[3].
  • When the money will actually arrive in your account. As this loan is facilitated through the banking system, it will likely vary bank by bank.

 

For further updates from the SBA

The SBA has been providing some email updates, like the one shown below. You can sign up to receive them here.

Dear Applicant,

On March 29, 2020, following the passage of the CARES Act, the SBA provided small business owners and non-profits impacted by COVID-19 with the opportunity to obtain up to a $10,000 Advance on their Economic Injury Disaster Loan (EIDL). The Advance is available as part of the full EIDL application and will be transferred into the account you provide shortly after your application is submitted. To ensure that the greatest number of applicants can receive assistance during this challenging time, the amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.

You may be eligible for another loan program, the Paycheck Protection Program, which is available through participating lenders. Below is a comparison of the two loan programs:

                                 Paycheck Protection Program                  Full EIDL Loan

PURPOSE Forgivable if used for payroll (minimum of 75% of the funds received) and the remaining for certain operating expenses (amount of any EIDL advance is not forgivable) To meet financial obligations and operating expenses that could have been met had the disaster not occurred (amount of any EIDL advance is forgiven)
TERMS Up to $10 million

1% interest rate

 Up to $2 million

3.75% for businesses

2.75% for non-profits
FORGIVABLE YES NO – EIDL Loan

YES – EIDL Advance
MATURITY 2 years 30 years
FIRST PAYMENT DUE Deferred 6 months Deferred 1 year

 

To locate a Paycheck Protection Program Lender, please visit: www.SBA.gov/PaycheckProtection.

Information on available resources may be found at www.sba.gov/coronavirus. For more information on these services, please go to www.sba.gov/local-assistance to locate the email address and phone number for the nearest SBA district office and/or SBA’s resource partners.

[1] SBA Interim Final Rule: Business Loan Program Temporary Changes; Paycheck Protection Program (13 CFR Part 120) https://home.treasury.gov/system/files/136/PPP–IFRN%20FINAL.pdf

[2] CARES Act Section 1102(a)(2)(A)(viii)(I)(bb), https://www.congress.gov/bill/116th-congress/house-bill/748/text

[3] SBA Interim Final Rule: Business Loan Program Temporary Changes; Paycheck Protection Program (13 CFR Part 120) https://home.treasury.gov/system/files/136/PPP–IFRN%20FINAL.pdf