The CARES Act of March 2020 included an advance or grant for an amount of $10,000 for those who applied for an Economic Injury Disaster Loan (EIDL). Later, SBA modified the grant amount and fixed it at $1000 per employee. On December 27, 2020, the day on which the government decided to extend some of the benefits of the CARES Act, passed the Economic Aid Act. The Act included funding provisions for specific EIDL grants to allow some business owners to get the full grant of $10,000. Earlier, the funds earmarked for the grants were exhausted, leaving many eligible businesses from getting the grant to confirm William D King.
Additional funding provisions of $10 billion for these grants are there in the American Rescue Plan Act dated March 11, 2021, together with another $5 billion for funding $5,000 supplemental grants for businesses with not more than 10 employees that have suffered at least 50% economic losses due to the COVID-19 pandemic.
William D King mentions the qualifying criteria for EIDL grants
Only businesses located in a low-income community can qualify for the total amount of $10,000 EIDL grant provided it suffered economic losses of 30% or more and the employee strength is under 300. Moreover, the business must fulfill some other qualifying factors mentioned in the CARES Act.
Any small business, or cooperative with fewer than 500 employees, a small agricultural cooperative or non-profit, a sole proprietorship firm owned by an individual with or without employees, an individual contractor, can qualify for the EIDL grant. However, the business must prove that it has been directly hit by Covid19 and has been in operation by January 31, 2020.
What is economic loss?
Economic loss for an entity as defined by the CARES Act constitutes the decline in gross receipts for a period of 8 weeks between March 2, 2020, and December 17, 2021, as compared to a similar 8-week period during 2019 or before March 2, 2020. For seasonal businesses, SBA would develop a formula to determine the economic losses.
Since the location of the business is a critical factor to qualify for the EIDL grants, SBA encourages the applicants to check the map to see if they meet the location-based criteria. In addition, borrowers can use SBA’s online tool to understand if the business’s area is located in a low-income community.
What are supplemental grants of $5,000?
The American Rescue Plan, a continuation of the CARES Act, provides a grant of $5,000 as Supplemental Targeted Advances for the hardest-hit businesses. The legislations provide cover to businesses that suffered more than 50% economic losses and employs less than 10 people. This grant is in addition to the EIDL grant of $10,000. Even if businesses are unaware of being eligible for the supplemental grant, SBA will make sure that no small business that actually qualifies for the grant actually gets it by reaching out to them, says William D King.
EIDL grants are not taxable at the federal level. Businesses that receive the grant could still avail the deductions toward qualified expenses paid for the funds, and no deduction will happen when considering PPP forgiveness.
