Economic Injury Disaster Loans (EIDL) Now Available Again!
Update: July 21st: The SBA has closed applications for the EIDL "advance", but not the EIDL "loan."
Family child care providers can once again apply for a forgivable loan from the Economic Injury Disaster Loan (EIDL) program.
Providers can apply for a forgivable loan of $1,000 per employee and count themselves as an employee. It's called an EIDL "advance" loan.
Apply here for this EIDL loan.
I've posted a video on how to fill out the EIDL "advance" application form as well as power point slides here.
You can use this money to pay yourself or pay for most business expenses including mortgage payments, utilities, and other expenses due to COVID-19. Most providers will simply use this money to pay themselves. To do so, write a check to yourself and put "EIDL payroll" in the memo line, or transfer money from one bank account to another.
Although the EIDL loan program was launched in April, it later limited new applications to agricultural businesses. Now that restriction has been lifted, and I encourage all family child care providers to apply. If you have already applied for the EIDL "advance" loan, you do not have to do anything further. The SBA will continue to process older applications.
EIDL "advance" vs. EIDL "loan"
I have heard from a lot of providers who are confused about the difference between these two EIDL loan programs.
The EIDL "advance," as described above, is a forgivable loan limited to $1,000 per employee. You count as an employee. You will be notified by email if your application was not approved and what steps you can take to request reconsideration.
The EIDL "loan" is a 3.75% interest loan that can be paid back over 30 years. The first payment is due 12 months after you receive the loan. Recently, a number of providers have been receiving offers of this "loan" from the SBA for $10,000, $20,000 and more. (It's not clear how this loan amount was determined.) In all cases, the providers never asked for this money! In some cases, providers already received the EIDL "advance" and in other cases they did not. This money is not a forgivable loan. If providers did not get the EIDL "advance," they cannot take part of the EIDL "loan" and make it forgivable.
According to the SBA, the money cannot be used for "repair or replacement of physical damages," or "expansion of facilities, acquisition of fixed assets." I assume this means it cannot be used for house or equipment repairs or to build a deck or purchase equipment, including furniture and appliances. But, we don't have any further clarification from the SBA on this.
If you do not intend to borrow money, don't accept the EIDL "loan." If you are offered the EIDL "loan" you must approve the loan application before you will be sent any money. You can always reject the "loan" offer. It is possible to get both the EIDL "advance" and EIDL "loan."
If you do get the EIDL "advance" as well as the Paycheck Protection Program (PPP) forgivable loan, you must subtract the EIDL amount from the forgivable portion of the PPP loan. For example, let's say you got $1,000 from the EIDL "advance" and $5,000 from the PPP. $5,000 - $1,000 = $4,000, which is now the new forgivable amount of the PPP loan. You can either return the $1,000 of the PPP loan with no consequence or keep it and pay it back at a 1% loan over 5 years. Here's more information about the PPP loan.
Tom Copeland - www.tomcopelandblog.com
Image credit: Small Business Administration
