EIDL Program Updates: Replenished Funding and New Targeted Guidelines

While much attention has been given to the recently-signed “Consolidated Appropriations Act, 2021” that provides crucial COVID-19 relief and has created a second round of Paycheck Protection Program (PPP) loans for small businesses, a few overshadowed – but important – updates have been made to the Economic Injury Disaster Loan (EIDL) Advance fund.

Replenished EIDL Advance Funding and New Targeted Program Created

Congress has made some noteworthy changes to the EIDL Advance (grant) program, as well as provided an additional $20 billion boost in its funding.  In addition, there is a new targeted EIDL advance program (available under the guidelines outlined below) that has been created to direct funding into the hands of small business owners with the greatest need.

EIDL Advance Approval Process Updates

The Small Business Administration’s (SBA’s) approval process was updated to:

1. Approval of applicant by either method:
   1. Solely on the credit score of applicant OR
   2. Using alternative appropriate methods to determine applicant’s ability to repay
2. Use information from Department of Treasury to confirm:
   1. Applicant is eligible to receive such loan OR
   2. Information contained in application for such loan is accurate

As a reminder, this advance (grant) program is based on the number of employees multiplied by $1,000, with a cap at $10,000. SBA will have 21 days to review and verify qualifications. They will notify an applicant if they are declined with a letter of understanding.

New Targeted EIDL Advance Program: Eligibility Rules

To be eligible for the targeted EIDL program funds:

1. An entity must apply during the covered period (January 31, 2020 to December 31, 2021), and this includes an entity that applied for funding prior to December 27, 2020.
2. The entity is located in a low-income community.
3. The entity has suffered an economic loss of greater than 30%. (This is different than PPP.)
   1. Determined by either:
      1. Looking at an eight-week period of gross receipts between March 2, 2020 and December 31, 2021 and a comparable business eight-week period during 2019; or using the eight weeks before March 2, 2020 OR
         1. Example: if you were to start your eight weeks at the start of wheat harvest in 2020, then you would look back in 2019 to the same time you started the wheat harvest. We all know wheat harvest is never on the same date/day, but is typically close.
      2. If the covered entity is a seasonal business concern, then such amount is determined by the SBA. Seasonal business has to meet the SBA’s definition.
   2. An entity should employ no more than 300 employees.

New Targeted EIDL Advance Program: Parameters

An additional change Congress made to the program was to help businesses that meet further qualifications to take advantage of the maximum $10,000 advance amount.

Eligible entities (as defined under the targeted EIDL eligibility rules listed above) who meet any of the parameters below, should be able to maximize the advance amount of $10,000.

• An eligible entity is able to request this full amount whether their EIDL application was approved previously or not, if the covered entity accepted the EIDL loan or not, or if the covered entity has any other 7a SBA loans.
• If an eligible entity did not receive the grant funds due to a lack of funding previously, they are able to request funding if they meet eligibility as well.
• If an eligible entity already received the grant portion from this EIDL program but did not receive the full $10,000, they are also able to request up to the $10,000 amount.

Looking Ahead

At this point, the exact process for this targeted program of EIDL Advance (grant) funds has not been entirely defined.  However, we do know that the SBA intends to notify eligible businesses of this opportunity.  (Note: The provisions did not state a deadline for when the SBA will need to notify businesses.)

As has typically been the case with COVID-19 stimulus programs, we expect additional guidance, announcements, and interpretations are still ahead of us. K·Coe advisors will continue to provide updates on any potential impacts for businesses.

Contact a K·Coe advisor with questions about available stimulus programs.  Our tax and financial experts can help assess how to maximize benefits and make advantageous business decisions.