What The Stimulus Package Says About The New EIDL Grants Coming In 2021
It’s been a long time coming. Scratch that. It’s been an unforgivably long time coming, but finally, a new stimulus package is on its way. The Consolidated Appropriations Act, signed into law at the end of December 2020, allocates $284 billion to the popular PPP program. It also allocates $40 billion to a new version of the Economic Injury Disaster Loan (EIDL) Grant and $15 billion to a new grant aimed at live entertainment venues impacted by the COVID pandemic.
As these programs are grants, they are essentially free money. You have no obligation to repay them. And who couldn’t use an infusion of free money right about now?
Here’s what we know so far.
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Official Guidance About EIDL Grants Is Still Forthcoming
The SBA has yet to release official guidance for the new round of EIDL grants, so there are still some questions remaining about the application process and what you’ll need to qualify.
The previous incarnation of the EIDL grant was introduced in March 2020 through the CARES Act to augment the SBA’s longstanding EIDL loan program. Called EIDL Advances, they offered $1,000 per employee to qualifying businesses, up to a maximum of $10,000.
We don’t know exactly how SBA grants in 2021 will work, so be sure to check back with us here at Merchant Maverick for a full rundown on how the new EIDL grants operate once that information has been released by the SBA and IRS.
Now let’s look at the information that has been released so far.
What The Stimulus Package Says About 2021 EIDL Loans & Grants
We expect the 2021 EIDL grants to be similar to the 2020 EIDL Advances, so let’s take a look at what’s carrying over and what’s changing.
- Total Available Funding: Interestingly, while the amount of money allocated to the new round of PPP has been decreased, the amount allocated to EIDL grants is actually being increased. Whereas the previous round was funded to a tune of $20 billion, the new round will be around $40 billion. This should make it easier for qualifying businesses to get a grant before the money runs out. Still, you probably won’t want to sleep on your application as there’s no guarantee the program will be renewed.
- Maximum Award Amount: EIDL grants award money based on the number of employees you have. You’ll qualify for $1,000 per employee, up to a maximum of $10,000. This makes the grant a better fit for very small businesses than mid-sized ones, who may want to concentrate on getting a PPP loan.
- Uses: The EIDL grant can be used to cover most operating expenses including rent, utilities, and fixed debt payments.
- Low-income Area Qualification: To qualify for an EIDL grant, your business must be located in a community designated as low-income. Low-income is defined as an area with a poverty rate in excess of 20%, or an area where the median household income falls below 80% of your state’s median household income. If you’re located in a metropolitan area, you can also qualify if your area has a median income of less than 80% of your metropolitan area in general. If you’re an independent contractor, or you don’t have a brick and mortar business location, you’ll use your home address to determine your business location. Your community is the census tract you’re located in. If you aren’t sure if your community qualifies, you can get a sense of your community’s income level using the FFIEC’s mapping tool.
- Economic Injury Qualification: Even if you meet the community location qualifications, there’s another hurdle to qualifying: you need to have suffered at least a 30% loss of income as a result of the COVID pandemic. To qualify, you’ll compare any eight-week period in 2019 to the same eight-week period in 2020.
- Apply Directly With The SBA: While PPP loans are disbursed through lenders, you’ll apply for an EIDL grant directly through the SBA.
- Tax-Free Money: While small business grants are normally taxable, it appears that EIDL grants will not be taxed by the IRS. Additionally, if you spend that money on expenses that would normally be deductible, you can still deduct them from your taxes.
- You Can Also Get A PPP Loan: Previously, EIDL Advances were deducted from the amount of your PPP loan that could be forgiven. The new stimulus bill repeals that rule.
- Ineligible Business: As you might expect, there are certain types of businesses the government isn’t eager to hand money to. These include lobbying organizations, sex-related businesses, and businesses that get more than a third of their revenue from gambling. You also can’t be a government institution, so if you’re a mayor looking for some extra scratch for some new carpeting at city hall, you’re out of luck.
Shuttered Venue Grants
- Total Available Funding: Congress has allocated $15 billion to the SBA to make grants to live venue operators, theatrical producers, live performing arts organization operators, museum operators, motion picture theater operators, and talent representatives. For the first 60 days, $2 billion is set aside for entities with up to 50 employees, after which point any unused money will be available to larger qualifying businesses.
- Maximum Award Amount: Qualifying businesses may be awarded up to $10 million initially, with a supplemental grant equal to 50% of the initial grant.
- Qualifications: In the first 14 days of the program’s implementation, grants will be awarded only to businesses that have suffered a 90% or greater loss of revenue. Following that period, there’ll be another 14-day period in which grants will only be awarded to businesses that have suffered a 70% or greater loss of revenue. After these two periods grants will be awarded to other eligible businesses.
- Uses: Grants can be used for specified expenses like payroll costs, rent, utilities, and protective equipment.
- Not Combinable With PPP: Unlike EIDL grants, Shuttered Venue Grants cannot be combined with PPP. You’ll have to choose one or the other.
Stay Tuned For More Information On EIDL Grants
We’re still waiting on official guidance from the SBA and IRS, so some of the finer details about these programs have yet to be hammered out. Remember that unlike the PPP, these programs are directly administered by the SBA, so you’ll want to keep an eye on their website for any updates once the programs become active. While there’s more funding available than last time and the restrictions are a little more stringent, I would expect these programs will be in very high demand.