April 22, 2020
On March 27th, President Trump enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bill includes an expansion of the Small Business Administration’s (SBA) long-standing Economic Injury Disaster Loan (EIDL) program.
Below, we address some of the common questions regarding this particular initiative. If you cannot find the answer to your question, please do not hesitate to reach out to your FIRM accounting advisor for further assistance.
What are the eligibility requirements for an SBA EIDL?
Expanded EIDLs, under the CARES Act, are designated for businesses that (1) were in existence on January 31, 2020, (2) have suffered substantial economic injury, and (3) fit into one of the following categories:
- Businesses that have fewer than 500 employees
- Cooperatives, employee stock ownership plans (ESOPs), and tribal small businesses (fewer than 500 employees)
- Sole proprietors
- Independent contractors
- Private nonprofits (some restrictions apply)
What did the CARES Act change about this loan program?
Under the CARES Act, EIDLs are designed to provide economic relief for eligible entities experiencing a loss of revenue as a result of the coronavirus pandemic. Applicants can ask for loans of up to $2 million, which can be used to provide working capital for a variety of expenses, including fixed debt and payroll costs.
The CARES Act relaxed a number of traditional EIDL loan stipulations. For EIDLs under the CARES Act, borrowers:
- Can receive up to $200,000 without providing a personal guarantee.
- Do not need to prove that they have no other sources of credit.
- Can receive up to $25,000 without providing collateral.
- Are not required to furnish first-year tax returns and can receive approval based on their credit score.
- Can request an emergency economic injury grant of $10,000 upon applying for the EIDL.
- Must allow the SBA to review its tax records.
What are the interest rates for these loans?
For businesses, the interest rate is 3.75%. For nonprofits, the interest rate is 2.75%. Interest begins to accrue when the loan is disbursed.
What is the term for one of these loans?
These loans can have up to a 30-year term. They include an automatic one-year deferral on repayment.
How do I apply for the loan?
Applications can be submitted online at www.SBA.gov/disaster. The SBA has streamlined the application process for the COVID-19 version of EIDL. They project that it should take applicants a maximum of two hours and ten minutes to complete.
What information does the application require?
The application for an SBA EIDL requests information in the following areas:
- Disclosure – Applicants must verify their eligibility (perform a self-certification under penalty of perjury).
- Business Information – Applicants will need their income statement as of January 31, 2020 to complete this section. Sections marked with a red star must be filled out; sections without a red star should only be completed if they apply to your situation.
- Business Owner(s) Information – For each owner of your business who has a 20% stake or more, you will need to supply a social security number, the birthdate and birthplace, the citizenship status, and a street address.
- Additional Information – In this section, applicants will be asked to furnish any information about criminal charges against any of the entity’s owners. Additionally, this is the section where applicants can request the $10,000 emergency economic injury grant. Lastly, applicants should verify that their bank information is correct.
How long does it take to receive the funds, once I apply?
Due to the changes to this program and the large increase in applications, it is not clear how long it will take for EIDL applications to be processed and funds to be dispersed. That said, upon submission of your application, you will be assigned a loan officer. In order to ensure that your loan is processed as quickly as possible, be sure to respond promptly to any questions that the loan officer has.
If you requested an emergency economic injury grant, you can expect to receive those funds within days of successfully filing your application.