The Coronavirus Aid, Relief, and. Economic Security Act (“CARES”) Provides $ 10 Billion Through SBA’s Section 7 (b) Disaster Loan Program and Expands Eligibility Standards in Response to COVID Pandemic -19. The EIDL program will provide small businesses in declared disaster areas with loans of up to $ 2 million to help overcome a temporary loss of income directly resulting from the COVID-19 pandemic.

Extended eligibility.

• The CARES Act expands the eligibility of borrowers applying for an EIDL grant. In addition to qualifying small businesses and private non-profit organizations (regardless of size), the following people may also receive loans if economic damage is due to the COVID-19 pandemic:
  • Companies with 500 employees or less.
  • Sole proprietorships, with or without employees.
  • Independent entrepreneurs.
  • Cooperatives with 500 employees or less.
  • Employee share ownership plans (ESOP) with no more than 500 employees.
  • Concerns of small tribal businesses.
• The period covered by the program is from January 1, 2020 to December 31, 2020.

Keywords.

• The EIDL program offers borrowers up to $ 2 million in assistance in the form of an SBA loan.
• The loan term can be up to 30 years.
• The interest rate is 3.75% for small businesses and 2.75% for nonprofits.
• The following EIDL requirements are now waived under the CARES Act:
  • The requirement of a personal guarantee on advances and loans less than $ 200,000.
  • The requirement that the entity must be in business for one year. (Under the CARES Act, however, businesses must have been in operation by January 31, 2020 to participate in the EIDL program.)
  • The requirement that the borrower cannot obtain credit elsewhere.
• Loans can be used to pay off fixed debts, personnel costs, accounts payable, and other operating costs that cannot be covered due to the COVID-19 pandemic.
• There are certain restrictions on how the loan can be used.
  • The loan proceeds are not intended to replace lost sales / profits.
  • The loan proceeds cannot be used to refinance debt, make payments on other federal loans, pay tax obligations, repair property damage, or pay dividends to shareholders.

EIDL grants of $ 10,000.

• Borrowers can also request an advance of up to $ 10,000, which will be distributed within 3 days of the request. When applying for a grant, the borrower must certify that he is an eligible entity according to the guidelines of the ASB.
• The $ 10,000 advance does not have to be repaid if the borrower is subsequently refused a loan under the EIDL program.

• The $ 10,000 advance can be used for any purpose already authorized under the program, including:
  • Grant sick leave to employees unable to work due to COVID-19.
  • Maintain payroll.
  • Supply chain costs.
  • Mortgage / rent payments.
  • Debts that could not be paid due to loss of income.

Relationship to the Paycheque Protection Program (“PPP”).

• If a borrower has an EIDL unrelated to the COVID-19 pandemic, they may also apply for a PPP loan due to the COVID-19 pandemic.
• If a borrower has an EIDL loan related to the COVID-19 pandemic, a borrower may not receive a PPP loan to use for the same purposes.
  • However, a borrower can use the PPP loan to refinance the existing EIDL loan. If a borrower received an EIDL loan related to the COVID-19 pandemic between January 31, 2020 and the date the PPP loan becomes available, the borrower can refinance the EIDL loan to a PPP loan for loan cancellation purposes. .
• If the borrower received an advance of $ 10,000 under the EIDL program, the lender will reduce that amount by the amount remitted under the P3.

Potential borrowers can visit the SBA website to start applying online.