Small businesses that have been affected by the coronavirus pandemic will be able to get a second loan from the Paycheck Protection Program. But the same is not true of another popular source of Covid-era funding for entrepreneurs.
The Economic Disaster Loan Program offers 30-year fixed rate loans that provide six months of capital to small businesses during the pandemic, to cover things like rent, utilities, debt repayments or maintenance. health care benefits.
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The Small Business Administration, which oversees the program, issued more than 3.6 million disaster loans during the pandemic worth a total of $ 194 billion, according to federal data through November.
But business owners can’t get a second EIDL loan, according to SBA spokesperson Tiffani Clements.
Second EIDL scholarship
This may confuse business owners, as the $ 900 billion Covid relief plan adopted last month allows some businesses to secure a second EIDL grant.
These grants were a new facet of the disaster loan program, which was available before Covid to cover shortfalls due to hurricanes and other events. (The federal government has expanded the availability of businesses nationwide due to the pandemic.)
The CARES Act allowed entrepreneurs to apply for up to $ 10,000 in grants, via an EIDL advance, which did not have to be repaid. The amount of the subsidy was based on the number of workers a company employed.
Now business owners can get another grant. Lawmakers also lifted the size restriction. Eligible entrepreneurs will receive the difference between $ 10,000 and their first grant allocation. (New applicants would be eligible for $ 10,000.)
Applications for a second grant – a targeted EIDL advance – will be available in the coming days, Clements said. The relief law allocated $ 20 billion for this measure.
The first $ 20 billion in grants through the CARES Act expired in July. Almost 6 million businesses have been financed.
Hard-hit entrepreneurs can be frustrated with the inability to pull out a second EIDL loan. Many may need additional funds to survive until a Covid vaccine is widely distributed and the economy rebounds.
Small business revenues have fallen by nearly a third and 30% of small businesses closed their doors last year, according to Opportunity Insights.
“They are in great pain,” President-elect Joe Biden said in a speech Thursday night describing a $ 1.9 trillion relief package, the US bailout, that would provide additional subsidies to small businesses.
Low income communities
EIDL grants will only be available to businesses in low-income communities whose revenues have fallen by at least 30% in an eight-week period since early March (compared to the same period in 2019).
The emphasis placed on businesses located in less wealthy neighborhoods is combined with that of new PPP financing.
This pandemic-era forgivable loan program reopened to applicants on Monday through some community lenders, who are focusing on underserved borrowers.
“What [lawmakers are] trying to do with the second round of PPP and the EIDL grant is to get money for these small minority owned businesses that kind of got sidelined in the first round, ”said Brooke Lively, president of Cathedral Capital, which does financial work for small business clients.
Federal lawmakers apply the same parameters as a new business tax credit to determine what constitutes “low income.” The law defines a deprived area as an area in which the poverty rate is greater than 20%, although other measures may also apply.
PPP applicants can get a loan of up to $ 2 million in the second funding round. They must have 300 or fewer employees and a 25% loss of income (in any quarter of 2020 compared to the same period of the previous year) to be eligible.
The Relief Act also removes an earlier requirement in the CARES Act that EIDL grants must be deducted from the forgivable amount of a PPP loan.
Subsidy for shutter room operators
A separate grant, the Shuttered Venue Operators Grant, will also be open to applicants in the coming days, Clements said.
The federal government is allocating $ 15 billion to operators or promoters of performance venues, museums, cinemas, theater producers and live performance venues that have lost 25% of their revenues due to the Covid downturn.
Businesses can get initial grants of up to $ 10 million and additional grants of up to half that amount.
The program will open first to businesses that have lost 90% or more of their revenue.