Cash is crucial, especially during the worst recession since the 1930s.
The highly popular federal Paycheck Protection Program (PPP) that paid forgiveness loans to millions of businesses ended back on August 8.
PPP loans could return in an altered form if Congress passes a new stimulus bill. But another source of relatively cheap money is still available now: the Economic Injury Disaster Loan (EIDL) program administered by the Small Business Administration (SBA).
You can apply for an EIDL even if you have already received a PPP loan.
But you may not use an EIDL to pay the same payroll costs or other expenses you pay with a PPP loan.
If PPP loans were the lending equivalent of a Cadillac, EIDLs are more like a Ford Focus: kind of boring and old fashioned, but they’ll get you there. EIDLs have been around since 1953 to help businesses deal with economic
losses caused by local disasters such as hurricanes, fires, and tornados.
When Congress enacted the CARES Act, it made EIDLs available to businesses in all 50 states that are impacted by the nationwide COVID-19 pandemic, and it loosened the eligibility rules.
Congress also established and funded a new EIDL emergency advance program that gave EIDL applicants loan advances of $1,000 per employee, up to $10,000. The advances are actually grants—they need not be paid back.
If you obtained both a PPP loan and an EIDL advance, your bank must deduct the advance amount from your PPP loan forgiveness.
The SBA ended the EIDL emergency advance program on July 11, when the $20 billion appropriated by Congress ran out (although Congress could create new funding for the advances).
If you obtained an EIDL advance, you are not required to apply for or accept a full EIDL. If you decide not to apply for the full EIDL, you should send the SBA an email informing them of your decision. Otherwise, you may get a call from the SBA. If you do apply for an EIDL, your advance is deducted from the loan amount. No matter what you do, you need not repay the advance.
Your business is eligible for an EIDL if it suffered “substantial economic injury” due to the COVID-19 pandemic. You qualify if your business is unable to pay its normal operating expenses and other bills or to sell or produce its goods or services. There is no requirement that your business revenue decline by any specific amount. Also, your business must have fewer than 500 employees. Sole proprietors and independent contractors with no
employees are eligible, as are non-profits But you’re out of luck if your business involves lobbying or gambling or is sex-oriented.
Your business need not have been in existence for more than one year, but it must have been in operation on January 31st, 2020.