The Economic Injury Disaster Loan & Emergency Economic Injury Grants – CARES Act:
This is a loan program funded and administered directly through the Small Business Administration. You do not apply at banks to secure this loan. This loan provides up to $10,000 in emergency advance (within three days of submitting the application) while an applicant’s loan application is pending. It has been stated that the SBA will not require repayment of the grant, even if the loan isn’t ultimately approved.
Private Foundations can also apply for this loan program and receive up to $10,000 in emergency funding. As far as we know to date, churches and other 501c3 organizations are excluded from applying for this type of program.
Q&A
Q: What types of businesses and entities are eligible for an EIDL and Emergency Economic Grant of $10,000?
A: The business types listed below that have been in operation since January 31, 2020, when the public health crisis began:
• Businesses and entities that must have been in operation on February 15, 2020.
• 501c Private Foundations
• Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals; with or without employees.
• Gig workers, those that receive 1099s, like Uber drivers.
Q: Who qualifies for the EIDL Program?
A: Basically all the businesses listed above that are in a declared disaster area [all 50 states, Puerto Rico, Guam and the North Mariana Islands have all been declared disaster areas for purposes of the EIDL Program effective January 31, 2020] to cover economic injury resulting from the disaster (e.g., loss of revenue).
Q: What should applicants be prepared to submit during the application process?
A: Applicants can apply directly through the SBA Disaster Loan Program page linked here, and will need to provide at a minimum the following:
• Completed SBA loan application (SBA Form 5) – you can secure though the website linked on SBA.
• Tax Information Authorizations (IRS Form 4506T) for the applicant, principals and affiliates.
• Complete copies of the most recent Federal Income Tax Returns (no requirement yet to have 2019 filed).
• Schedule of Liabilities (SBA Form 2202)
• Personal Financial Statement (SBA Form 413)
Q: How long are the funds available?
A: The funds are available through this program from January 31, 2020 thru December 31, 2020. The loans are available in a maximum amount of $2 million, carrying an interest rate of 3.75 percent and have a maximum term of 30 years. The interest rate for Private Foundations is 2.75%.
Q: When is the first loan payment due?
A: One year after the loan origination date (interest is accruing during deferment).
Q: What can the loan be used for?
A: Financial obligations and operating expenses that could have been met had the disaster not occurred.
Q: Is there a personal guarantee required?
A: Yes, on this loan (unlike the PPP program), owners of greater than 20% ownership will need to guarantee. However, no liens will be placed against real estate owned by the guarantor. The SBA will wave any rules related to the personal guarantee on advances and loans of not more than $200,000 during the covered period.
Q: Is there a loan forgiveness feature?
A: No not with this loan, only with the PPP loan.
Q: If I get an EIDL and/or an Emergency Economic Injury Grant, can I get a PPP Loan?
A: Yes, you can still receive a PPP Loan or even refinance an EIDL into a PPP loan. You cannot use your EIDL for the same purpose as your PPP loan.
Q: How do I apply for an economic injury disaster loan?
A: To apply for an EIDL online, please visit the SBA Disaster Loan Program page linked here. Remember they are still in the process of updating the application. If you apply before the application is updated, you will have to re-apply to receive the Emergency Economic Injury Grant.
Q: Can this loan be forgiven?
A: No, this is not a forgivable loan like the PPP loan.