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COVID-19 Response: What is an EIDL?

by Megan Roberts, Extension educator

Economic Injury Disaster Loans (EIDLs) are not new, but for many farm businesses, they seem new. Previously, agricultural small businesses generally did not qualify for this type of loan from the Small Business Administration. Disaster relief programs for farms have typically been associated with the United States Department of Agriculture on the federal side, or the Minnesota Department of Agriculture on the state side. However, the Paycheck Protection Program and Health Care Enhancement Act, H.R. 266, signed into law on April 24, 2020, specifically made farms and ag businesses eligible for EIDLs. We cover farm eligibility in greater detail in a previous blog post.

 On May 4, 2020, the Small Business Administration opened a special application window for agricultural enterprises to apply for EIDLs and EIDL emergency advances. According to the SBA, the primary object of this special window is to process emergency loan advances. The emergency advances are for up to $10,000, are designed to be processed quickly, and are forgivable due to current COVID-19 related congressional appropriations.  A farm business owner applies for the EIDL emergency advance through the same application as the Economic Injury Disaster Loan. Therefore the EIDL advance and the EIDL are very closely related although can be thought of as two semi-separate relief programs. The farm business owner is not required to repay the EIDL emergency advance, even if subsequently denied the loan portion of the EIDL program (according to section 7(b)(2) of the law). Because of very limited funds, SBA has been limiting the emergency advance to $1,000 per employee with a cap of $10,000. There have been some questions about what farmers should put in the number of employees blank on the EIDL advance application. While there is not specific guidance at this point, generally it is best to keep the number of employees equivalent to the number of W2s you issue. Therefore, if you're self-employed without additional employees, a "0" would be entered in the application even though as a self-employed individual you employ yourself. 2019 tax returns would be your reference document for most of the financial information needed. UPDATE July 2020: EIDL emergency advance funding has lapsed. EIDLs are still available but not the advance grant.

Amounts larger than $10,000 are available through the EIDL program, but unlike the emergency advance, the regular EIDL functions like a typical loan and needs to be repaid. According to the SBA, these loans can be used to: “pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%. The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.” The maximum loan amount a farm could possibly qualify for through the EIDL program is $2,000,000. UPDATE May 2020: Due to the demand for EIDLs related to COVID-19, it appears SBA is currently limiting EIDLs to no greater than $150,000, an amount significantly lower than the $2,000,000 max written in law. 

Finally, it is important to note that EIDL emergency advances are interrelated with another COVID-19 SBA program, the Paycheck Protection Program (PPP). If an EIDL emergency advance related to COVID-19 is made, it reduces the applicant's forgivable PPP loan by an equivalent amount up to $10,000. To learn more about PPP, read our previous blog post.

Note: due to limited funding and the evolving situation of COVID-19, this information may change as laws are passed and rules/regulations are written. This blog is offered as educational information only. It does not constitute not legal or financial advice.

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