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When the Small Business Administration (SBA) opened the door to more EIDL grants, it came with some stipulations, one of them being that your business must be in a low-income community. Another wave of EIDL grants may be on the horizon. Should that happen, expect the low-income community EIDL qualification to remain in place. Here’s what you need to know if you plan on applying. What Is EIDL?
EIDL stands for Economic Injury Disaster Loan. It is administered by the SBA and was created to help small businesses, nonprofits, and small agricultural cooperatives recover from economic injury after a disaster. The EIDL was expanded by the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) to help anyone financially damaged by COVID-19 and COVID-19 safety and security measures. Therefore, there are currently two types of EIDL loans available to small business owners: traditional EIDL and COVID-19 EIDL.Traditional EIDL Loan
With a traditional EIDL loan, you can receive up to $2 million. However, in order to apply, your business must be affected by a declared disaster other than COVID-19. To see if you’ve been affected by a declared disaster, you can refer to the SBA’s list of current declared disasters. Here you can search by both state and county.Recent disasters on the SBA website include:- Remnants of Hurricane Ida
- Remnants of Tropical Depression Ida
- Hopkins Fire
- Brannan Island Fire
- Georgia flooding
- California pipeline oil spill
There are also agriculture-declared disasters for those in the farming business. States such as Iowa, Nebraska, Oklahoma, Kansas, and Texas have been known to suffer from severe drought, while states such as New Jersey and North Carolina can suffer from natural flooding. COVID-19 EIDL Loans
With a COVID-19 EIDL loan, you can receive as much as $2 million as of September 8, 2021, for economic injuries suffered as a result of the pandemic. All COVID-19 EIDL loan applications must be submitted by December 31, 2021; however, you may submit a reconsideration request up to six months after a denial. Can You Get Both?
How many EIDL loans can you get? If you’re wondering whether or not you can get both a traditional EIDL loan and a COVID-19 EIDL loan, the answer is yes. You can even apply for a second COVID-19 loan if you received your original before the limits were increased in April or September of 2021. What can an EIDL loan be used for?
In case you’re wondering what you can use EIDL loans for, the answer is quite a lot. EIDL loans can be used for any of the following:- Payroll
- Rent
- Health care benefits for employees
- Repairs
- Utilities
- Fixed debt payments
- Replacing inventory
- Prepayment of commercial debt
- Payment of federal business debt
Borrowers must prove how they used the funds. To do this easily, the SBA suggests that borrowers keep EIDL funds in a separate bank account. What Is Considered a Low-Income Community for EIDL?
EIDL considers any community that is 80% or lower than the average state income to be a low-income community. However, there are other ways to determine if your business is in a low income community. How to Tell If You Are in a Low-Income Community
Low income community EIDL grants may not currently be available, but they may make an appearance sooner than you think. If so, expect a low-income requirement once again. What Low-Income Community Means
A targeted EIDL advance low-income community grant means that your business must be in an area where:- More than 20% of the families in the community are at or below the poverty level
- The average family income in the community is 80% or lower than that of the state
- The average family income in the community is 80% of that of a nearby metro area
Justice.gov has a chart that outlines the median family income state by state by family size, which may make it a good low income community research EIDL tool. To determine 80%, find your state and multiply by 0.8.Example: In New York, the median family income for two people is $76,219.$76,219 x 0.8 = $60,975.20
In this example, any area where the yearly average income is $60,975.20 or less would be considered to be at the poverty level in New York and would qualify for the EIDL low-income community grant. Figuring Out Community Demographics
The SBA released a tool in the PolicyMap that is essentially a EIDL low income community map. It illustrates which areas have been calculated to be low-income communities and which areas have not been. Users can zoom in by area, or they can type in the address of the business in question to see if they qualify for the EIDL grant for low income communities.To be safe, don’t assume your business is in a below-average area. When you type in your address, you may find that the SBA has separated below average and average income areas with a surprising amount of detail. There aren’t blankets of below-average or average communities. It truly goes back and forth. Business Location for Online Business or an Independent Contractor
It’s easy to say where your business is located if you have a physical office or business space that you go to. But what if you don’t? How do you determine if you’re in an EIDL low income community? It’s actually not complicated. If your business is mostly online or you travel to different jobs as an independent contractor, then your business’s location is your home address. And if that’s tricky, too, then the address you put on your taxes is the address you must use when determining if you’re located in a low-income community. Other EIDL Requirements to Know
The requirements for EIDL loans are quite different from other business loans. For starters, the business must have 500 or fewer employees, and be within one of the 50 U.S. or U.S. territories. The business must also classify as any of the following:- Agricultural business
- Small business
- Cooperative
- Employee Stock Ownership Plan
- Nonprofit
- Tribal small business
In addition to meeting the above qualifications, there are numerous factors that can disqualify you from receiving an EIDL loan, such as:- Being more than 60 days behind on child support payments
- Being in the lobbying industry
- Being in the gambling industry
- Presenting ‘’live performances of a prurient sexual nature’’
Currently, there isn’t an EIDL loan amount calculator to determine how much you’ll get. The SBA looks at each business owner’s past financials and compares them to COVID-19 financials to calculate how much of a loan he or she will get. Once you get a loan offer, however, it is easy to determine how much your monthly payments will be by putting in the loan terms into a loan calculator. As far as fees are concerned, there isn’t a prepayment penalty on EIDL loans, nor are there any fees for choosing to make payments during the deferral period. The Takeaway
An EIDL loan is one option, but receiving an EIDL loan is not a guarantee and you will need to wait to find out if you qualify. Plus, there are many types of emergency relief funds for businesses you may want to consider. At Lantern Credit, comparing business loan rates is easy because we’ve simplified rate shopping by eliminating the need to do so: one application gets you offers from multiple lenders who want to work with you.
Photo credit: iStock/stevegeer
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About the Author
Lauren Ward
Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
