New EIDL Grants: How To Tell If Your Business Is In A Low Income Community
In 2020, the SBA added a popular grant component to their Economic Injury Disaster Loan (EIDL) program as a response to the COVID-19. That program had exhausted the $20 billion allocated for it by summer 2020 — but now it’s back. The stimulus package passed December 21, 2020, re-funded the EIDL program to the tune of $40 billion.
There are some catches, however.
One of the biggest changes to the EIDL grant program is the requirement that your business has to be located within a low income community.
While you may have a vague sense of the economic values for your city or region, it’s easy to over – or underestimate the average household income of your immediate area. Knowing whether or not you’re eligible for an EIDL grant will save you some labor and potential issues with the SBA and IRS down the road.
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What Is A Low Income Community?
Community is one of those words that sounds like it has an obvious meaning, but in practice can mean a lot of different things. In the case of qualifying for an EIDL grant, what the SBA is talking about is your census tract. Depending on how populated your area is, there may be many census tracts within your municipality or very few. As it turns out, there are slightly different measures for businesses that are located in rural areas as opposed to metropolitan ones.
Now that we know what your community is, let’s take a look at what’s considered low income by the language in the grant program.
First, the easy metric. If your community has a poverty rate of 20% or more, it’s a low income community.
The other way to qualify as low income is relative to your state (if you’re in a more rural area) or the rest of your metropolitan area. So for rural businesses, if your community’s median family income is 80% or less of the statewide median income, you’re considered a low income community. For suburban and urban businesses, you’ll be considered low-income if the median family income for your community is 80% or less of your metropolitan area’s median family income. This provision allows communities that may be “high-earning” relative to the national metric, but who live in poor parts of expensive areas to still qualify.
How To Tell If You’re In A Low Income Community
So now that you know what a low income community is, how do you confirm that you are in one? You will use census data. The good news is that this is likely the same data the government will use to determine eligibility.
One of the easiest ways to check the income levels of your census tract is to use the Federal Financial Institutions Examination Council’s (FFIEC) geomap tool. Don’t let the Web 1.0 presentation intimidate you, it’s actually pretty straightforward to use. In the address window, just plug in your address (street, city, and zip code) and hit the search button.
So let’s say you run that Corn Palace in Mitchell, South Dakota.
You’d put in your address, selecting 2020 for the year. You’d then click on the “Census Demographic Data” tab. This will bring up a cell with four tabs on it. Select “Income.” There, we discover that the Corn Palace is located in a middle income tract with 17.88% of the community population below the poverty level. So you don’t qualify under the first condition. Right below that we see that tract’s median family income is around 86.74% of the state’s (because it’s not considered part of a metropolitan statistical area (MSA)) median family income.
Sadly it appears the Corn Palace does not qualify for an EIDL grant under the new rules. As a live venue, however, they may qualify for a shuttered venue grant, however.
Other EIDL Grant Requirements
Even if your business is located in a low income community, there are a few more qualifications you’ll have to meet before you can get one.
First, your business needs to employ a maximum of 300 people.
Second, your business needs to have suffered a loss of revenue of at least 30%. To determine this, you take an eight-week period between March 2, 2020 and December 31, 2021 and compare it to a comparable eight-week period in 2019.
You’ll also need to be in an industry eligible for EIDL assistance. This includes many agricultural enterprises, religious and government-owned concerns, businesses considered hobbies, businesses that get more than a third of their gross revenue from legal gambling activities, and speculative real estate.
Where To Apply For The EIDL Grant
If you think you qualify for an EIDL grant, the only thing left to do is apply. Unlike the PPP, EIDL grants and loans are directly administered by the SBA. As of this update, the SBA is not yet taking applications for EIDL grants, but keep your eyes on their COVID-19 EIDL application page for when it opens.