As the government continues to disperse the funding within the over $2 trillion bill, citizens and employees affected by the COVID-19 pandemic, nonprofits, small businesses, and their employees will reap the benefit. The CARES Act contains a section specifically designated for small business grants and loans. These grants and loans are designed to stimulate the economy following closures and layoffs due to the COVID-19 pandemic.
If you’re interested in discovering more about Emergency Economic Injury Grants, their relation to other grants and loans, the application process and more, information follows below.
What are Emergency Economic Injury Grants?
Emergency Economic Injury Grants comprise $10 billion in funding as part of the larger, recently passed CARES Act. This portion of the Act ensures that nonprofit and small business can receive grants of up to $10,000. The grants will be given to applicants within three days of submitting an application.
How Can the Grant Money be Used?
If you’re interested in the Emergency Economic Injury Grant, you’ll want to know how the grant funding can be used. Luckily, there are several ways that you can use your grant to aid your business and your employees. The grant can be used to provide:
- Maintain payroll
- Meet production costs
- Pay business obligations (debts, mortgage payments, and rent)
- Pay sick leave to employees
Who Can Apply for Economic Injury Grants?
As a small business owner, you’ll want to know if your business can benefit from an Economic Injury Grant. The following types of businesses are eligible for Economic Injury Grants:
- Cooperatives and employee-owned businesses
- Independent contractors
- Private nonprofits
- Small businesses
- Sole proprietors
- Tribal businesses
However, only businesses that have been in operation since January 31st, 2020, can apply for an Economic Injury Grant. Prior to disbursing the payment, the Small Business Administration must verify that your business is an eligible applicant for the Economic Injury Disaster Loan. While this can limit your status of applying for this particular loan, it may not be a barrier for other types of small business loans that are offered.
How Can I Apply?
Applications for Economic Injury Grants can be found on the Small Business Administration’s website. A link with additional details and further instructions can be found here.
NOTE: As of April 16th, 2020, the SBA is no longer accepting applications for disaster loans. This is due to the fact that the funding provided by the CARES Act has been used up.
What’s the Difference Between EEIGs and EIDLs?
First, Emergency Economic Injury Grants are available from January 31st, 2020, to December 30th, 2020. Small business owners in all 50 states, Washington D.C., and U.S. territories can apply for a related loan, an Economic Injury Disaster Loan (EIDL). EIDLs are available to small businesses whether their losses are related to COVID-19 or unrelated to the pandemic.
If you’re interested in applying for an Economic Injury Disaster Loan (EIDL) and Emergency Economic Injury Grant, here is what you should know. EIDLs are interest loans of up to $2 million and their principal and interest are deferrable for up to 4 years. EIDLs are also available through the Small Business Administration (SBA) with higher limits than Emergency Economic Injury Grants.
These loans have a maximum amount of $2 million with interest rates that range from 2.75% (nonprofits) to 3.75% (companies). EIDLs can be used for expenses that would’ve been incurred if the COVID-19 hadn’t occurred. Similar to the Emergency Economic Injury Grant, EIDLs can be used for payroll and other expenses.
Private, nonprofit businesses that are not 501(c)(3)s are also eligible for an EIDL. If you’re a business owner, your business must have been in operation since January 31st, 2020, to apply.
What Should I Know Before Applying?
There are several details that you should know before applying for Emergency Economic Injury Grants. Even if your business is not eligible for this particular grant, the following information may still be beneficial.
You should also know that it is possible to receive multiple types of small business grants and loans. Emergency Economic Injury Grants can be combined with other loans. If you receive either an Emergency Economic Injury Grant or EIDL between January 31st, 2020, to June 30th, 2020, you can also apply for a Paycheck Protection loan (PPP).
However, if you apply for and eventually receive either an Emergency Economic Injury Grant and EIDL or an Emergency Economic Injury Grant and PPP, you can’t use both for the same purpose. This means that if you receive an EIDL in May, you can’t use a PPP loan in the same month. Instead, you could use an EIDL to cover expenses in May and a PPP loan for June.
If you’re the recipient of a PPP loan or you refinance your EIDL into a PPP loan, the amount that you receive from your Emergency Economic Injury Grant would be subtracted from the amount that is forgiven in your PPP loan.
Work with a Professional
The Emergency Economic Injury Grant portion of the CARES Act is another milestone for small business employees and small business owners. Its immediacy, within three days of submitting an application, allows nonprofits, small businesses, and local economies to restore parts of their economy that have been severely affected by the COVID-19 pandemic.
The grants will allow small business owners to pay their employees and provide sick leave. Moreover, other types of company structures and workers will see benefits. Workers in company structures such as cooperatives and employee-owned businesses, independent contractors, and tribal businesses will see similar benefits upon receiving Emergency Economic Injury Grant funding.
If you are unsure about how to apply for an Emergency Economic Injury Grant, it may be helpful to work with an accounting professional. Don’t hesitate to seek advice from the experts to guide your business through this global crisis.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.