There has been much ado about round two of the Paycheck Protection Program (PPP) enacted in the Consolidated Appropriations Act signed into law on December 27, 2020 (Appropriations Act); however, the Appropriations Act also made significant and important updates to the Economic Injury Disaster Loan (EIDL) program as well, specifically adding a targeted EIDL Advance Program.

Additional and Targeted Funding

The EIDL grants were renewed in the Appropriations Act, receiving $40 billion in funding. In addition, there is a new targeted EIDL Advance Program created to direct funding to those small businesses with the greatest need.

Targeted EIDL Advance Program (Grants)

EIDL grants are based on the number of employees a business has equal to $1,000 per employee up to $10,000 and can be used to cover most operating expenses including rent, utilities and fixed debt payments.

To qualify, a business must employ no more than 300 individuals and be located in a community designated as low-income which is defined as an area with a poverty rate in excess of 20%, or an area where the median household income falls below 80% of its state’s median household income. If a business is located in a metropolitan area, it can also qualify if its area has a median income of less than 80% of its metropolitan area in general. Independent contractors without a brick and mortar business location can use their home address to determine their business location.

Once the community location qualifications are met, there is a second qualifying factor; a business must have suffered at least a 30% loss of income as a result of the COVID pandemic measured by comparing any eight-week period in 2019 to the same eight-week period in 2020.

While grants are normally taxable, it would appear that the IRS will not tax the EIDL grants and that the expenses associated with the grants will be deductible.

The program will open starting January 17, 2021, with the SBA and businesses needing to apply before December 31, 2021. Previously, EIDL advances were deducted from the borrower’s PPP loan forgiveness amount (for those grant recipients with a PPP loan). However, that is not the case thanks to the Appropriations Act – the forgiveness will not be taxable and the expenses associated with the grant will be deductible.

You are able to request a full Advance Program grant whether you are approved for an EIDL loan or not, and if you did not receive it when you originally requested it, you can request it again. Further, if the advance that a business received in a previous request was less than it was eligible to receive, the business can request the remaining portion up to $10,000.

Finally, there are businesses that are ineligible for the Advance Program, including lobbying organizations, sex-related businesses, businesses that get more than a third of their revenue from gambling, and government institutions.

EIDL Loans

Other than the additional funding, not much changed with the actual EIDL program other than the Advance Program described above. To recap the EIDL program:

EIDL Program Description
Purpose To meet financial obligations and operating expenses that could have been met had the disaster not occurred
Qualification Generally businesses with less than 500 employees (affiliation rules apply, no carve-out for restaurants)
Terms 3.75% for business, 2.75% for nonprofits; 30 years; no prepayment penalty or fees
Use of Proceeds Working capital, normal operating expenses
Collateral Required for loans over $25,000
Forgivable EIDL Loan – No
EIDL Advance – Yes
Maturity 30 years
Payments Deferred one year, interest still accrues
Maximum Loan $150,000

What’s Next

The exact process for the targeted EIDL Advance Program has not been put forward. We understand that the SBA intends to notify eligible businesses of this opportunity. (Note: The provisions did not state a deadline for when the SBA will need to notify businesses.)

As has typically been the case with COVID-19 stimulus programs, we expect additional guidance and announcements, and interpretations are still ahead of us. If you have any questions, please reach out to a member of GBQ’s COVID-19 team, including Rebekah SmithDustin Minton, or Jeremy Bronson.


Article written by:
Rebekah Smith, CPA, CFF, CVA, MAFF
  Director of Forensic & Dispute Advisory Services
Dustin Minton, CPA, MBA
  Director, Assurance & Business Advisory Services
Jeremy Bronson
  Director, Accounting & Business Advisory Services

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