COVID-19 SBA Assistance

Small Business Assistance Partnership
EIDL - Disaster Load Assistance

Brown, DePrez & Johnson, P.A. is proud to announce a partnership with the Shelby County Development Corporation, Blue River Community Foundation, Mainstreet Shelbyville, and Shelby County Chamber of Commerce to help guide local businesses through the EIDL (Economic Injury Disaster Loan) application process. There is no cost to take advantage of our services thanks to a grant graciously provided by the Blue River Community Foundation and Shelby County Development Corporation in partnership with Mainstreet Shelbyville and the Shelby County Chamber of Commerce.

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Economic Injury Disaster Load ("EIDL")

    What Types of Small Business Loans Are Available? - EIDLs: The EIDL program is available for certain business concerns located in an area affected by a disaster — such as a public health disaster — that have suffered a substantial economic injury as a result of such disaster. The CARES Act includes a $10 billion package to expand the SBA EIDL program to additional eligible business concerns impacted by the COVID-19 pandemic. The EIDL grant provisions allow the applicant to request that the SBA provide an advance in the amount requested — but not to exceed $10,000 - within three days of when the SBA receives the applicant's application.
    Who Is Eligible for Loans? - EIDLs: The following entities are eligible for these EIDL grants: – Business concerns with not more than 500 employees – Small business concerns that meet the applicable size standard for the industry as provided by the SBA, if this number is greater than 500 – Private nonprofit organizations – Small agricultural cooperatives – Any individual who operates under a sole proprietorship or as an independent contractor – A cooperative with not more than 500 employees – An employee stock ownership plan (ESOP)6 with not more than 500 employees – Tribal small business concerns with not more than 500 employees
    What Business Concerns Are Excluded? - EIDLs: The following business concerns are excluded: – Public nonprofit organizations – Business concerns that appear small but do not meet the requirements due to affiliation rules set out by the SBA Unlike the CARES Act waiver of affiliation rules for certain business concerns in the 7(a) loan program, there is not a similar waiver of the affiliation rules for EIDLs.
    How Is Size Calculated? - For Both 7(a) SBA Loans and EIDLs: The SBA requires the number of employees to be counted based on the business concern applying for the loan and all its affiliates. – Business concerns are required to perform this calculation as an average for each of the pay periods for the previous 12 months. – Affiliation determinations can be very fact-specific and include consideration of a number of factors including ownership, management, control, economic interdependence, contractual relationships, and minority investor rights.
    Are There any Eligibility Requirements? - EIDLs: In addition to being an eligible business concern under the existing regulatory framework, an applicant must meet several requirements to be eligible: – The applicant’s business concern must be located in a declared disaster area. The applicant’s business concern must have suffered “substantial economic injury” as a direct result of a declared disaster such as COVID-19. – The applicant must not own property subject to a judgment lien owed by the US government.
    How Much Can an Applicant Receive? - EIDLs: The maximum amount available to eligible small business concerns is $2 million — an amount that is subject to a waiver if the applicant’s business concern is a “major source of employment” — but the actual loan amount is limited to the economic injury as determined by the SBA (less business interruption insurance or other recoveries such as potential contributions available from the business concern and/or its owner(s) or affiliates). The applicant can also request an advance of not more than $10,000, which the SBA should provide within three days of receiving the applicant’s application. – If a recipient of an EIDL needs an additional loan amount, the borrower may make a request for an increase in the loan amount to the SBA generally, provided the borrower does so no later than two years after the SBA approved the original EIDL. The SBA will consider a number of factors before granting the request.
    Are There any Collateral or Personal Guarantee Requirements? - EIDLs: The CARES Act waives any existing rules related to the personal guarantee on advances and loans of not more than $200,000 during the covered period of January 31, 2020 and ending December 31, 2020. The CARES Act does not expressly mention collateral requirements. The existing collateral requirements for EIDLs — which provide that collateral is generally required for loans of more than $25,00015 — appear to apply.
    Are There any Credit Requirements? - 7(a) SBA Loans and EIDLs: No, under the CARES Act, the typical requirement that a small business concern show that it is unable to obtain credit elsewhere does not apply to a 7(a) covered loan or EIDL.
    What Are the Restrictions on Use of EIDLs? - A recipient can only use EIDLs to cover certain costs. Traditionally, EIDLs are only expressly permitted for: – Working capital necessary to carry the business concern until resumption of normal operations – Expenditures necessary to alleviate the specific economic injury, but not to exceed that which the business concern could have provided had the injury not occurred. The CARES Act expands the allowable uses of EIDLs to include:
      Providing paid sick leave to employees unable to work due to the direct effect of COVID-19;
      Maintaining payroll to retain employees;
      Meeting increased costs to obtain materials unavailable from the applicant’s original source because of interrupted supply chains;
      Making rent or mortgage payments;
      Repaying obligations that cannot be met due to revenue losses.
    Proceeds of EIDLs may not be used for certain expenses. Recipients cannot use EIDLs to: – Refinance indebtedness incurred prior to the disaster event – Make payments on loans owned by another federal agency (including the SBA) or an SBIC – Pay, directly or indirectly, any obligations resulting from a federal, state, or local tax penalty as a result of negligence or fraud, or any non-tax criminal fine, civil fine, or penalty for non-compliance with a law, regulation, or order of a federal, state, regional, or local agency or similar matter – Repair physical damage – Pay dividends or other disbursements to owners, partners, officers, or stockholders, except for reasonable remuneration directly related to their performance of services for the business concern.
    What Are the Fees and Interest Rates? - EIDLs: The statutory limit for EIDL interest rates is 4% per annum. However, the SBA has lower rates specific for business concerns impacted by COVID-19: 3.75% for small business concerns and 2.75% for nonprofits.
    Is the Loan Guaranteed? - EIDLs: The CARES Act does not contain any express provisions regarding the guarantee of EIDLs.
    What Are the Repayment Considerations? - EIDLs: Under the CARES Act, an applicant is not required to repay any amounts of an advance provided under the Act even if the applicant is subsequently denied the EIDL grant. If an applicant receives an advance under the CARES Act but is approved for a 7(a) loan instead, the advance amount is reduced from the amount of the loan eligible for forgiveness under the 7(a) program.
    Is a Business Concern Eligible for Loan Forgiveness if it Already Laid Off Workers? - EIDLs: EIDLs are not eligible for loan forgiveness.
    Is a Business Concern Eligible for Loan Forgiveness if it Already Reduced Salaries or Wages? - EIDLs: Normally EIDLs are not eligible for loan forgiveness. BUT, emergency EIDL grant of up to $10,000 is forgiven. Grant must be used for the following expenses:
      Providing paid sick leave to employees unable to work due to the direct effect of the COVID–19;
      Maintaining payroll to retain employees during business disruptions or substantial slowdowns;
      Meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;
      Making rent or mortgage payments;
      Repaying obligations that cannot be met due to revenue losses.
    Is There Loan Deferment? - EIDLs: Payments deferred for one (1) year.
    Who Will Be Given Priority? - EIDLs: The CARES Act does not include priority provisions related to EIDLs.
    Can a Business Concern Still Qualify if it Implements a Reduction in Force? EIDLs: The CARES Act does not address the eligibility requirements for EIDLs regarding whether business concerns have conducted reductions in force, furloughed, or otherwise laid off employees.
    Who Can Lend? - EIDLs: The SBA may make EIDLs directly or in participation with a financial institution.
    What Factors Does the Lender Consider When Reviewing a Loan Application? EIDLs: The SBA may approve the applicant based solely on the applicant’s credit score and not require a tax return or tax return transcript or use alternative appropriate methods to determine the applicant’s ability to repay the loan.
    How Can a Business Concern Apply? - EIDLs: Applicants apply directly to the SBA.