Looking for an Alternative to the PPP? Taking a Second Look at the Economic Injury Disaster Loan (EIDL) Program

05/01/2020

The Economic Injury Disaster Loan (“EIDL”) program is an existing loan facility offered by the Small Business Administration (“SBA”) under Section 7(b) of the Small Business Administration Act of 1953. The purpose of the EIDL program is to extend low-interest credit to small businesses that are impacted by disasters. In the wake of the COVID-19 crisis, the federal government has enacted new legislation aimed at enhancing the availability and accessibility of EIDL funds.

First, under the terms of the Coronavirus Preparedness and Response Supplemental Appropriations (“CPRSA”) Act, the coronavirus pandemic was declared a disaster, allowing affected businesses to apply for an EIDL. The CPRSA Act also allocated $20 million to the EIDL program.

Further, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act modified the EIDL program by establishing the Emergency EIDL Grant (“Emergency EIDL Advance”) to provide a loan advance of up to $10,000 to EIDL applicants. The Emergency EIDL Advance will not need to be repaid, even if the qualifying business is denied an EIDL. The CARES Act allocated $10 billion towards Emergency EIDL Advance.

Finally, the recently enacted H.R.266, the Paycheck Protection Program and Health Care Enhancement Act (the “PPP/HCE Act”) includes $60 billion of additional funding for the EIDL program, $10 billion of which is allocated toward the Emergency EIDL Advance. Reports released by the SBA show that as of April 19, 2020, a total of 26,919 EIDLs have been approved, and 755,476 Emergency EIDL Advances processed, totaling amounts of $5,566,913,788 and $3,293,963,000 distributed under each program, respectively.

Below is a high-level summary of the provisions relating to the EIDL program and Emergency EIDL Advance as modified and supplemented by the CARES Act and PPP/HCE Act (including periodic guidance and FAQs released by the Department of Treasury and SBA). We expect the U.S. Department of Treasury and the SBA to provide further guidance and regulations on the legislation in the coming days and weeks. Such guidance and regulations will provide further detail on the administration of EIDL program and Emergency EIDL Advance and may materially change the summary below.

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