The Coronavirus Preparedness and Response Supplemental Appropriations (CARES) Act provides $10 billion to expand the U.S. Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) Program to provide small business owners with low-interest working capital loans.
The EIDL loans offer up to $2 million in assistance and may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The cap can be waived by the SBA if an applicant’s business is a major source of employment in the area, as defined by 13 C.F.R. § 123.202.
The interest rate on the loans is 3.75 percent for small businesses. The interest rate for non-profits is 2.75 percent. Loan terms, such as collateral requirements, are determined on a case-by-case basis, based upon each borrower’s ability to repay, but the loan duration may not exceed 30 years.
According to the CARES Act, the EIDL loans include a $10,000 advance that does not need to be repaid. However, SBA announced in a bulletin on April 6 that it has decided to implement a $1,000 cap per employee on the advance, up to a maximum of $10,000 per company. Further, if the small business also enrolls in the Paycheck Protection Program (PPP), the EIDL advance will be deducted from the PPP loan forgiveness amount.
Most small businesses are eligible for EIDL loans so long as they have less than 500 employees (including sole proprietorships, independent contractors, self-employed persons, private non-profit organization and 501(c)(19) veterans organizations). Businesses in certain industries that may have more than 500 employees also may be eligible if they meet the SBA’s size standards for those industries. For example, pet food manufacturers may have up to 1,000 employees and be considered small businesses. Other animal food manufacturers are capped at 500 employees. Grain storage businesses are considered small businesses if they have fewer than 500 employees or less than $30 million in annual revenue.
To be eligible for an EIDL loan, applicants must be able to meet all of the following conditions:
- Applicant is not engaged in any illegal activity (as defined by Federal guidelines).
- No principal of the applicant with a 50 percent or greater ownership interest is more than sixty (60) days delinquent on child support obligations.
- Applicant is not an agricultural enterprise (e.g., farm), other than an aquaculture enterprise, agricultural cooperative, or nursery.
- Historically, agricultural enterprise has been defined as agricultural producers, farmers and ranchers. These agricultural enterprises have been deemed ineligible for the Economic Injury Disaster Loans to prevent duplication with assistance that is provided by the U.S. Department of Agriculture.
- Agricultural enterprise does not mean farm-related and nonfarm-related entities. These types of entities, which NGFA believes encompasses agribusinesses, are eligible for Economic Injury Disaster Loans. Therefore, an agricultural business applying for an Economic Injury Disaster Loan would check the box that they are not an agricultural enterprise.
- Applicant does not present live performances of a prurient sexual nature or derive directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature.
- Applicant does not derive more than one-third of gross annual revenue from safe betting sites Michigan offers or any other legal gambling activities.
- Applicant is not engaged in the business of lobbying.
- Applicant cannot be a state, local or municipal government entity, and cannot be a member of Congress.
To apply for an EIDL Loan and loan advance, click here. The deadline to apply for an EIDL loan is Dec. 18, 2020. For questions, contact the SBA disaster assistance customer service center at 1-800-659-2955 or e-mail email@example.com.