Are You Eligible For An Emergency Grant NOW? Changes to the Economic Injury Disaster Loan Program and Emergency Grants

A major element of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was enacted on March 27, 2020, is the expansion of the Economic Injury Disaster Loan program under Section 7(b)(2) of the Small Business Act, under which eligible recipients can receive up to $2 million in financial assistance. Since COVID-19 has been declared to be a major disaster, economic injury disaster loans are available to eligible small businesses in all U.S. states and territories.

The CARES Act expands the entities that are eligible to receive these economic injury disaster loans, waives many of the usual requirements included in the terms of these loans, and appropriates $10 billion for economic injury disaster loan emergency grants, which can be awarded to eligible entities in the amount of $10,000 each.  The modifications to the Economic Injury Disaster Loan Program in the CARES Act are discussed in detail below.

Expansion of Eligibility

In addition to the small businesses that were already eligible for economic injury disaster loans (i.e. small business concerns, private nonprofit organizations and small agricultural cooperatives), the CARES Act expands eligibility to include:

• Businesses with 500 or fewer employees
• Sole Proprietors
• Independent Contractors
• Cooperatives with 500 or fewer employees
• Employee Stock Ownership Plans with 500 or fewer employees
• Tribal small business concerns with 500 or fewer employees

Changes in Terms of Economic Injury Disaster Loans

The CARES Act provides for the waiver of usual requirements of SBA economic injury disaster loans, as follows:

• Waiver of the personal guarantee for loans under $200,000
• Waiver of requirement that business must have been operating for more than 1 year, except that the business must have been operating on January 31, 2020
• Waiver of requirement that applicant was unable to obtain credit elsewhere

Emergency EIDL Grants

Entities that are eligible to receive economic injury disaster loans, as expanded by the CARES Act and listed above, may also request an emergency advance of up to $10,000 to be used to pay sick leave, maintain payroll, pay increases in costs due to supply chain interruption, pay rent or mortgage payments, and repay obligations that cannot be met due to revenue losses. Applicants for these emergency grants must self-certify that each is an eligible entity to receive an economic injury disaster loan, subject to penalties of perjury, and these emergency advances must be awarded by SBA within 3 days of receipt of an application. Recipients of the emergency advances are not required to repay any amounts even if they are denied an economic injury disaster loan; provided, however, if a recipient of an emergency advance is approved for a loan under the Section 7(a) of the Small Business Act, as amended by the CARES Act, the advance amount shall be reduced from the loan forgiveness amount for payroll costs under that program.  The authority of the Small Business Administration to give emergency grants under the CARES Act terminates on December 31, 2020.

How Do I Apply?

The SBA has streamlined its application procedures, and loans may be obtained by filling out the application found HERE.

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