Emergency Economic Injury Disaster Loans & Emergency Economic Injury Grants

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Emergency Economic Injury Disaster Loans (EIDL) are available to small businesses and nonprofits that have suffered substantial economic injury. Emergency loans have lower interest rates for loans of as much as $2 million, with principal and interest deferment at the SBA’s discretion. They are available to cover expenses that could have been met had the disaster not occurred, including payroll and other operating expenses. Emergency loans are available for eligible businesses and organizations in operation since Jan. 31, 2020.

Like the Paycheck Protection Program, navigating this program can be chaotic and contentious. Multiple reports claimed that a lack of funds made the $2 million figure elusive for most businesses. The SBA was overwhelmed, and businesses couldn't get the assistance they needed even to apply. Introduction of the much larger PPP after the EIDL added complexity to chaos, and greater demand for limited resources. A complete description of this program is beyond the scope of this guide –– businesses seeking this relief must consult with a financial professional and be proactive to have much chance of short-term success.

Some basics: entities eligible for an emergency loan are:

• businesses and organizations with fewer than 500 employees
• sole proprietorships, with or without employees
• independent contractors
• cooperatives and employee-owned businesses
• tribal small businesses
• most private nonprofits of any size

Emergency Economic Injury Grants (emergency grants) are available to businesses and organizations eligible for emergency loans and who have been in operation since Jan. 31, 2020. Even if applicants are not approved for an emergency loan later, they will not be required to repay any emergency grant advance payment.

The grant must be used to:

• Provide paid sick leave to employees unable to work for reasons related to COVID-19.
• Maintain payroll to retain employees during business interruption.
• Meet increased costs to obtain materials unavailable due to interruption in supply chains.
• Make rent or mortgage payments.
• Repay obligations that cannot be met due to revenue loss.

If a company accepts certain emergency direct lending relief under CARES, it must agree to certain limitations on the compensation paid to its officers and employees (including salary, bonuses, equity and other financial benefits). The limitation will remain in effect until one year after the loan or loan guarantee ceases.

Emergency loans and grants are available to businesses that have applied for or received PPP loans. If a such a loan is received or an emergency loan is refinanced into a PPP loan, any advance emergency grant funds would be deducted from the amount forgiven in the PPP.

Businesses may not use an emergency loan for the same purpose as the PPP loan.

Businesses can apply for the emergency loan at https://www.sba.gov/local-assistance/find/.

See Also

• Federal Action Including the Coronavirus Aid, Relief, and Economic Security Act
• Emergency Paid Sick Leave Act
• Emergency Family and Medical Leave Expansion Act

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