Schneider Downs continues to track the evolving landscape of federal financial programs offered in the wake of the business disruption caused by the coronavirus crisis. On December 21, 2020, the Consolidated Appropriations Act (the Act) was passed by both houses of Congress. See our article for a high level summary of some of the provisions included in the Act. One of the provisions was the inclusion of additional funds to support the Economic Injury Disaster Loan Advance program (EIDL2).
How Much Additional Funding Was Approved?
$20 billion.
What are the Eligibility Requirements?
The appropriation of EIDL2 is primarily to those entities in low-income communities. Entities that had received an advance under the original program pursuant to the CARES Act will have priority, followed by entities that meet the below eligibility criteria.
An entity must meet the following eligibility requirement to be considered a covered entity:
- Applies for/is eligible for a loan under section 7(b)(2) of the Small Business Act during the covered period;
- Is located in a low-income community;
- Has suffered an economic loss of greater than 30%; and
- Employs not more than 300 people.
How is an “economic loss” defined?
The amount by which gross receipts declined during an 8-week period between March 2, 2020 and December 31, 2021, relative to a comparable 8-week period immediately preceding March 2, 2020, or during 2019. If the entity is a seasonal business, the amount will be determined by the Administrator of the Small Business Administration.
How much of an advance amount is a business eligible for?
Up to $10,000.
Is the entity entitled to the full amount of the advance?
Yes, once the Administrator verifies the entity is a covered entity, it is entitled to the full $10,000 advance without regard to whether:
- The applicable loan an entity applies or applied for under Section 7(b)(2) of the Small Business Act is or was approved;
- The covered entity accepts or accepted the offer of the Administrator in regards to an approved loan;
- The covered entity has previously received a loan under section 7(a) of the Small Business Act.
If a covered entity received less than $10,000 previously pursuant to the CARES Act EIDL advance, the payment will be the difference between $10,000 and the amount previously received.
Is the Advance Deducted from any PPP Loan Forgiveness?
In a change from the original rules, EIDL advances are no longer deducted from any PPP loan forgiveness which would be effective as of the enactment date of the CARES Act.
Is the Advance Considered Taxable Income?
In a change from the original rules, EIDL advances will not be considered taxable income. Additionally, no deduction will be disallowed.
For How Long is the Advance Available?
Until the $20 billion is exhausted, or December 31, 2021.
If you need more information or assistance regarding an EIDL advance, visit our website at schneiderdowns.com/ppp, reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal at [email protected].
