Stimulus: EIDL Grant For Small Businesses Will Be $1,000 Per Employee, Per SBA Clarification

Recent guidance from the Small Business Administration suggests that the ‘up to $10,000’ EIDL grants for small businesses with be $1,000 per employee, maxing out at $10,000 for businesses with 10 employees.

Background

There are numerous government programs which were introduced in the massive CARES Act – the bill which sends $1,200 checks to most Americans – including various grant and loan initiates for small businesses of under 500 employees. We gave a run-down of the basic details in this article. These programs are available for a sole-proprietorship or gig worker as well; think: an Uber driver, Amazon reseller, contractor, etc.

One of the more interesting programs – especially for the little guy – is the Economic Injury Loan & Grant (EIDL) which offers loans of up to $200,000 with no personal guarantee. Most interestingly, the bill also allows for $10,000 of the loan to be considered a grant instead of a loan; basically, a free $10,000 for any business negatively affected by the pandemic.

EIDLs can be used to cover:

• Paid sick leave to employees unable to work due to the direct effect of COVID-19.
• Maintain payroll
• Increased costs due to supply chain disruption
• Rent or mortgage payments
• Repaying obligations that cannot be met due to revenue loss

SBA Clarification

Direct Link to SBA Clarification Bulletin | Twitter link

It wasn’t initially clear how the ‘up to $10,000’ grant/advance forgiven part of the loan would be decided. Now, in what appears to be a bulletin from the US Small Business Administration to the state of Massachusetts (?), there’s a clarification that the grant/advance portion of the EIDL will be $1,000 per employee, up to $10,000 max:

EIDL Loan advances will start to be distributed this week. $1000 per employee up to $10,000 max

Self-employed/sole-proprietors/gig-workers/contractors should still be eligible as a “1 employee” business and should be able to get $1,000, I’d think. Larger businesses will max out at $10,000.

PPP + EIDL

Just a quick note here: you can get both the EIDL grant/loan and the Paycheck Protection Program (PPP) loan and forgiveness program. However, the bulletin notes that the advance/grant portion of the EIDL will be deducted from your PPP forgiveness:

Any advance up to $10,000 on the Economic Injury Disaster Loan will be deducted from the loan forgiveness amount of the Paycheck Protection Program loan.

While you can get both the PPP loan and the EIDL loan, the grant/forgiven portion of the EIDL will be reduced from the amount you can get forgiven from your PPP loan. So someone planning on getting a PPP loan (whether for the cash float or whether they just want the forgiveness element) won’t gain anything by applying for EIDL. You might as well just ignore EIDL and do everything through PPP since it has a lower interest rate.

Wrap Up

Lots of people jumped on this to apply early with the hopes of getting in on the grant before the allotted government fund are depleted, and they may be disappointed in getting less than $10,000 if their business is smaller. In some sense this is good news since it sounds like the grant is real, and that it should truly be feasible for any small business to get at least the smaller amount of money, even a single-member sole proprietorship, gig worker, contractor, and the like.

It might be the easiest $1,000 you make with a 10 minute application (find application link here), though it’s also possible they’ll make it a bit difficult with various protocols. And they might require verifications that the funds are being used for payroll, rent/mortgage, or other eligible expenses.

Far as I can tell, if you have a side gig (outside of your regular 9-5) which you report and pay taxes on and which has been negatively impacted from the pandemic, you should be eligible for this EIDL loan/grant as well. This is a business program so it shouldn’t take into account what other sources of income you have (e.g. your 9-5 job), it just takes into account whether the business has been hit.

Regardless, please do not commit fraud if your business was not negatively affected by the pandemic. A huge percentage of business have been affected, but not all. If you’ve been affected, but feel you don’t really need the money for your business to continue, you might consider taking the money anyway for your payroll/rent/whatever, and then donating the equivalent amount to charity (hat tip to Greg from FM who mentioned such an idea on his podcast).

Update 4/17/20: This $1,000-per-employee rule has now been confirmed by an email sent out from SBA as well.

Related:

• Stimulus: Government To Send Out $1,200 Checks/Deposits To Most US Residents; Expanded Unemployment & More
•  US Stimulus: Should You File Your 2019 Tax Return Now?
• Stimulus Bill Adds $300 Charitable Contribution Deduction For 2020 & Beyond
• Stimulus Bill Forbids Credit Agencies From Issuing Negative Marks For Certain Deferred Payments
• Stimulus Bill: Making Sense Of The Options For Small Businesses & Employers (Grants + Loans)
• Stimulus Bill: Explaining the Unemployment Benefit for Employees, Self-Employed & Gig Workers
• Stimulus Checks: People Who Don’t File Taxes Can Register Their Bank Info With IRS-TurboTax Online Portal To Get Their $1,200
• IRS Now Lets You Check Your Stimulus Payment Status
• A Few Updates On Those $1,200 Stimulus Checks
• A Few Updates On The Small Business Grant & Loan Programs (PPP, EIDL Funding Round 2)
• IRS Website Finally Allows You To Add Bank Information For $1,200 Stimulus Direct Deposit
• Lawmakers Overhaul PPP Loan Forgiveness Program For Small Businesses
• EIDL Loan & Grant Program Reopens For New Applications