A Revised Grant for Small Businesses: the EIDL Advance
The American Rescue Plan Act (ARPA), signed into law on March 11, 2021, revisited and extended the Economic Injury Disaster Loan (EIDL) Advance program.
If you applied for an EIDL and received an Advance in 2020 that was less than $10,000, you may now have an opportunity to apply for additional funds.
Here is the EIDL Advance backstory
The EIDL Advance is a $10,000 grant that the SBA pays within 36 hours of your application for an EIDL.
The idea is to provide band-aid assistance to those suffering a disaster.
COVID, however, broke the system. In March/April of 2020, applications for the loan overwhelmed the SBA and the funds available for the EIDL program.
As a result, the SBA changed the grant: instead of providing a $10,000 grant, they paid $1,000 per employee up to $10,000. So, if you had 1 employee, you received $1,000, and if you had 5 employees, you received $5,000. Additionally, by mid-July, the Advance funds were completely depleted, so from mid-July on, no one received an Advance.
Enter the targeted EIDL Advance
The ARPA revisited the EIDL Advance and provided funds for “targeted” increases. If you received the Advance and received less than the full $10,000, you may be eligible to apply for the difference between the amount you received last year and the $10,000 maximum.
The SBA has established two priority groups for these targeted grants (subject to the requirements below):
- Priority group one is all companies that received an EIDL Advance of less than $10,000.
- Priority group two is all companies that applied for but did not receive the Advance because the program was out of money.
If you applied in 2020 you should receive an email letter from the SBA inviting you to apply for the new program. You will receive this invitation whether or not you qualify. There will be a simple application, but you will have to meet the targeting criteria to receive the grant.
These criteria are:
- The business must be located in a low-income community as defined in section 45D(e) of the Internal Revenue Code. The SBA will map your address to verify that you qualify. You can find the map and verify for yourself here.
- The business must have suffered an economic loss greater than 30 percent over an eight-week period beginning on March 2, 2020, or later, compared to the previous year. To verify, the SBA will require that you provide the total gross receipts from January 2019 to the current month-to-date.
Gross receipts include “all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees or commissions, reduced by returns and allowances for the applicant business.”
- The business must have fewer than 300 employees. Most businesses that applied for the EIDL are eligible except for agricultural businesses (such as farmers and ranchers).
How to apply and information that you will need
You should receive an invitation from the SBA to apply. The invitation will come to the same email address you used to apply for the original EIDL.
This email will include a link unique to you that will take you to the application form. Most of the form is simple; it just asks you to confirm your business and confirm that you qualify.
The only tricky part is a month-by-month statement of gross revenues for 2019 and through this year. They will also ask you some questions about your 2019 income. So be prepared with your by-month revenue and your 2019 Federal Tax Return. The SBA may also ask you for a 4506-T form so that they can access your 2019 tax return directly.
The SBA’s stated goal is to process all requests within 21 days of application. They will communicate through email, so check your email.
One caveat: there is no appeal process. If they reject your application, that is it. So be sure to enter your information correctly and double-check.
Use and repayment of the EIDL Advance funds
EIDL Advance funds can be used for working capital and normal operating expenses that could have been met if the disaster had not occurred. Those include (but aren’t limited to) continuation of health care benefits, rent, utilities, and fixed-debt payments.
The advance is a grant so you will not have to repay it. For this reason, if you think you qualify you should apply. The worst that can happen is that the SBA rejects your application.
The EIDL Advance grant is not taxable income and otherwise deductible expenses paid for with the EIDL Grant are deductible.
The SBA has an FAQ document available here.
If you have more questions, concerns, or did not receive the invitation you should contact the SBA’s Customer Service Center at 1-800-659-2955 or by email at TargetedAdvance@sba.gov.
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