The Coronavirus Aid, Relief, and Economic Security (CARES) Act has expanded the Small Business Act’s (SBA) Emergency Economic Injury Disaster Loan (EIDL) grant program to allow small businesses, who are suffering economic harm due to COVID-19, access to loans and provided them with $10 billion in funding to support this program.
EIDL loans are made for the purpose of covering economic injury resulting from a disaster and are processed through the SBA or other lenders that the SBA has enlisted to assist with the processing and distribution. EIDL loans are for no more than $2 million, bear interest at 3.75%, and are repaid over 30 years or less. Loans greater than $200,000 are required to be guaranteed by all those who own 20% or more of the borrower; however, the CARES act removed the personal guaranty provision for loans under $200,000.
Currently, all 50 states, as well as Puerto Rico, Guam, and the North Mariana Islands, have been declared disaster areas. Therefore small businesses located in these areas could be eligible to apply for EIDL loans. The CARES Act removed the requirement that the borrower must have been in business for more than a year and instead requires that it was operating on January 31, 2020. The act also removed the requirement that the borrower could not obtain credit elsewhere.
The CARES act will allow the SBA more flexibility to process and disperse small-dollar loans. It will also allow businesses that apply for EIDL expedited access to capital through an Emergency Grant, an advance of up to $10,000 within three days to maintain payroll, provide paid sick leave, and to service other debt obligations. If used for these authorized costs, this advance is not repayable if the EIDL loan is not approved.
If you need assistance to determine if this or any provision of the CARES Act applies to you or your business, contact your CRI advisor for more information. As this current crisis creates new challenges daily, CRI will continue to keep you apprised of relevant information as it develops. Please refer to our COVID-19 Resources page on our website for the latest developments.