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Updated March 30, 2020 - CARES Act EIDL Loans and Emergency Grants


Under the approved CARES Act, many small businesses are now able to obtain Section 7(a) SBA loans under the Paycheck Protection Program (which also allows for loan forgiveness). The regulations for the new Paycheck Protection Program Act may take time to implement and borrowers who have an extremely limited headcount may not be qualified. If you do not have time to wait for the Paycheck Protection Program Act to be implemented and have fewer salaried employees, you may want to consider filing for an Economic Injury Disaster Loan (EIDL). 

Additionally, unlike borrowers that receive a Paycheck Protection Program loan, recipients of an EIDL may also still claim the Employee Retention Credit provided within the CARES Act.  Generally, under the Employee Retention Credit provisions of the CARES Act, employers may receive a credit against employment taxes for 50% of qualified wages paid for each employee during (1) any government ordered closure period; or (2) demonstration of a decline in gross receipts of at least 50% during a specified period.  It is recommended that you consult your payroll tax advisor regarding any Employee Retention Credit on payroll taxes and in connection with the consideration of any SBA loan under the CARES Act. .


Filing is already open with for EIDL loans. Financial assistance can be as much as $2 million dollars at an interest rate of 3.75% for small business and 2.75% for non-profits with a maturity date up to 30 years. Additionally, from January 31 to December 31, 2020: upon the proposed CARES Act being signed into law, qualifying entities may request that the SBA provide an emergency grant (capped at $10,000.00) either from funds already received or an advance on their EIDL application. An applicant shall not be required to repay any amounts of any such advance or grant, even if the applicant is subsequently denied on a pending EIDL loan.

Additionally, under the CARES Act, those that can receive an EIDL has been expanded and requirements for an EIDL have been modified. EIDL loans have been expanded to assist any individual who operates under a sole proprietorship, with or without employees or as an independent contractor, as well as any business, co-op, ESOP, or tribal small business (that in each case has fewer than 500 employees). The SBA is now waiving several qualifying conditions normally required: (1) the personal guarantee requirement for loans of not more than $200,000, (2) that the applicant be in business for 1-year period before the disaster, and (3) that the applicant is unable to obtain credit elsewhere. Additionally, the SBA may approve applicants based solely on the credit score of the applicant, and not require the applicant to submit a tax return or other evidence of ability to repay.

Any such advance or Emergency Grant requested in connection with a EIDL loan may be used for: (1) providing paid sick leave to employees unable to work due to the direct effect of COVID-19, (2) maintaining payroll to retain employees during business disruptions or substantial slowdowns, (3) meeting increased costs to obtain materials unavailable from original sources due to interrupted supply chains, (4) making rent or mortgage payments, and (5) repaying obligations that cannot be met due to revenue losses.


If an applicant receives an EIDL loan and advance and later elects to transfer into, or is approved for, a CARES Paycheck Protection Loan, the EIDL advance will be forgiven under the loan forgiveness provisions of the Paycheck Protection Loan. Note, borrowers can apply for and receive both an EIDL and Paycheck Protection Loan, provided, however, any advance/grant under the EIDL will offset the amount able to be forgiven under the Paycheck Protection Loan.

Qualifying small businesses and sole proprietors should therefore consider if they have an immediate need for an EIDL loan (which can be applied for now) and its new $10,000.00 emergency grants. These same companies can also file for a loan under the Paycheck Protection Program under the CARES Act. That carries the benefit, if they are approved for both, of allowing them to either transfer any EIDL loan obtained into the Paycheck Protection Program loan or have the benefit of both loans, provided, however, any advance/grant under an EIDL loan will offset loan forgiveness provided under a Paycheck Protection Program loan.

You should discuss with your tax advisor and counsel what your options are to obtain the emergency grant EIDL funds and also file under the Paycheck Protection Loan Program while maintaining the ability to receive any Employee Retention Credit on employment taxes.


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