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Disaster loans limited to $1k per employee

Key Takeaway – The EIDL is now less attractive to businesses with fewer than 10 employees as of January 31, 2020. EIDL funds will not be available as quickly as PPP funds. Businesses who applied for the EIDL but did not apply for the PPP should reevaluate.

The SBA provides two loan programs to support small businesses impacted by COVID-19: the Economic Injury Disaster Loan (EDIL) and the Paycheck Protection Program (PPP). The SBA sent an email today regarding changes to the EIDL. Unfortunately, new limitations have been placed on the EIDL which are unfavorable to small businesses. A copy of the SBA email announcing the changes is available at this link.

Original guidance. The SBA initially stated that each EIDL applicant would receive an “advance” of up to $10,000.

New Limitation. The advance is limited to $1,000 per employee, up to a $10,000 maximum, based on the number of employees your business had as of January 31, 2020.

Original Guidance. The SBA stated that every business applying for the EIDL would receive the advance within 3 days of applying.

New Guidance. The Advance will be disbursed to businesses “shortly” after a full application is submitted. To date, most businesses have completed a short application online. The SBA does not yet have a clear process for obtaining full applications from businesses.

Original Guidance. The SBA stated the Advance would not have to be repaid.

New Guidance. The new guidance does not discuss repayment. It is clear that the SBA is willing to change the EIDL program with little notice. Businesses should be reluctant to assume the $10,000 advance will not have to be repaid.

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