Small businesses impacted by COVID-19 may be eligible for a Targeted EIDL Advance (grant) of up to $10,000, as well as a Supplemental Targeted Advance of $5000. These grants do not have to be repaid. The SBA is now encouraging all eligible businesses to apply.
To be considered for one of these grants, your business must meet the eligibility requirements (see below) and apply (or have applied) for an Economic Injury Disaster Loan (EIDL). However, you do not have to get or accept the loan to get the grant.
Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and financial advisors.
By way of background, the CARES Act that was passed March 27, 2020 included a grant (or advance) for those who applied for an EIDL loan, in the amount of up to $10,000. The SBA later determined that those grants would be made in an amount of $1000 per employee. In addition, the funds available for grants were exhausted before all eligible businesses received them. The Economic Aid Act that passed December 27, 2020 included funding for Targeted EIDL grants, which will allow some of those business owners to get the full $10,000 grant.
The American Rescue Plan signed March 11, 2021 includes $10 billion in additional funding for these grants as well as another $5 billion to fund $5000 supplemental grants for businesses with ten or fewer employees that have suffered an economic impact of at least 50%.
Do I qualify for the Targeted EIDL Advance (grant)?
To qualify for the full $10,000 targeted EIDL grant, a business must:
- Be located in a low-income community, and
- Have suffered an economic loss greater than 30%, and
- Employ not more than 300 employees
In addition, the business must qualify as an eligible entity as defined in the CARES Act:
- A small business, cooperative, ESOP Tribal concern, with fewer than 500 employees;
- An individual who operates under as a sole proprietorship, with or without employees, or as an independent contractor; or
- A private non-profit or small agricultural cooperative.
- The business must have been in operation by January 31, 2020
- The business must be directly affected by COVID-19
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.” The SBA will develop a formula for seasonal businesses.
The SBA has released an online tool to help borrowers understand if they are in a low-income area, noting that “the business address must be located in a low-income community in order to qualify, so SBA encourages potential applicants to check the map to see if they meet the low-income community eligibility requirement before you apply.”
How do I demonstrate economic loss?
Getting your business tax documents organized and up to date will be essential to applying for this grant and demonstrating you qualify.
In its FAQs, the SBA explains that “applicants who meet the low-income community criteria will be asked to provide gross monthly revenue for January 2019 through the most recent month-to-date period (all forms of combined monthly earnings received, such as profits or salaries) to confirm the reduction in revenue. They may also be asked to provide an IRS Form 4506-T to allow the SBA to request tax information on the applicants’ behalf. Tax verification process and requirements for businesses in U.S. territories may differ.”
The SBA recommends that you get your tax filing completed as soon as possible. You will be required to provide your business’ monthly gross receipts for each month from January 2019 through the most recent month-to-date period. This information will be used to determine that your business meets the greater than 30 percent reduction in revenue requirement during an 8-week period beginning on March 2, 2020.
What are the new $5000 supplemental grants?
The American Rescue Plan includes $5 billion in funding for Supplemental Targeted Advances (grants) of $5000 to hardest hit businesses. The legislation states these grants will be available to covered businesses that:
- Suffered an economic loss of greater than 50 percent; and
- Employ not more than 10 employees
This grant is in addition to the $10,000 Targeted EIDL Advance. The SBA will reach out to small business owners who applied for the Targeted Advance if they appear eligible for the supplemental grant.
Are EIDL grants taxable?
Good news! Legislation clarifies that EIDL grants are not taxable at the federal level, that businesses who receive them will not be denied a tax deduction for qualified expenses paid for with those funds, and that EIDL grants will not be deducted from PPP for loan forgiveness purposes. Check with your tax advisor about tax implications at the state or local level.
How do I apply for a Targeted EIDL Grant?
If you previously applied for an Economic Injury Disaster Loan, you will receive an invitation by email inviting you to apply for the targeted grant.
If you have not yet applied for EIDL you can do so at SBA.gov. If your business appears eligible, you will be invited to apply for the Targeted Advance. You do not have to accept the EIDL loan (or even be approved for the loan) to get the grant, if you qualify.
Important! Check your spam folder for email from the SBA and watch out for scams. The SBA is contacting previous applicants directly via email with instructions to determine eligibility and submit documentation. The SBA advises:
All communications from SBA will be sent from an official government email with an @sba.gov ending. Please do not send sensitive information via email to any address that does not end in @sba.gov.
Any EIDL Grant (not loan) previously received will be subtracted from the $10,000 Targeted EIDL Advance.
Will I have to reapply if I got an EIDL grant for less than $10,000?
No. The SBA has, or will, reach out to you by email and will provide instructions about how to provide the required information to determine eligibility, and how to submit documentation for any additional grant funds.
Can I reapply or get a second EIDL loan?
The SBA recommends you do not apply again as it will result in a notification that your application is a duplicate. However, you may be eligible for a larger EIDL loan. The SBA has recently increased the amount available to businesses that received EIDL loans before April 7, 2021. Your business may be eligible for an additional loan of up to $500,000 (total) for 24 months of economic injury. You should receive an email from the SBA inviting you to apply for the loan increase.
If your business was declined for an EIDL loan you may request reconsideration. Send your reconsideration request to firstname.lastname@example.org. If you prefer to mail it, send it to: U.S. Small Business Administration Disaster Assistance Processing & Disbursement Center 14925 Kingsport Road FortWorth, Texas 76155. The SBA instructs you to include your application number and any information you may have that will help overcome the reason for decline.
What if I never applied for EIDL?
If you have not previously applied for EIDL, you may apply at SBA.gov. You will be able to apply for the low-interest-rate loan through December 31, 2021 as long as funds are available. If it appears your business also qualifies for the Targeted Advance or Supplemental Advance, the SBA will invite you to apply.
Can an EIDL loan be forgiven?
No. EIDL loans (not advances) must be repaid over 30 years. Unlike PPP loans, there is no forgiveness process for these loans.
Can I also apply for a Paycheck Protection Program (PPP) loan?
Yes! Paycheck Protection Loans (PPP loans) may be fully forgiven if they are spent on certain expenses (primarily payroll) which essentially turns them into a grant. Note that the PPP loan program is now closed to new applicants. However, if your business received a PPP loan, you may still be eligible for an EIDL loan and/or grant. Businesses may apply for both PPP and EIDL if they qualify.
Where can I get help filling out the EIDL application?
We recommend you connect with your local SBA resource partner such as SCORE, your Small Business Development Center or Women’s Business Center. Many are providing free help and education for EIDL grants and loans. Get assistance from a SCORE mentor.