SBA Economic Injury Disaster Loans & Loan Advance Program

As a follow up to our guidance on the CARES Act, we want to make you aware of the Small Business Administration’s (SBA) Economic Injury Disaster Loans & Loan Advance Program (EIDL).

All 501c entities are eligible to apply for a COVID-19 EIDL loan…this includes sorority or fraternity organizations, house corporations and other similar nonprofit organizations. The loan provides working capital up to $2 million to small businesses and can be used for payroll, accounts payable, debt payments and other bills that could have been paid had the disaster not occurred.

Click here to read more information directly from the SBA on the COVID-19 EIDL program. On that page you will also see the application link. One of the highlights of the EIDL program is a Loan Advance of up to $10,000. This loan advance, in some places referred to as an “emergency grant,” does not have to be repaid even if the applicant is denied the loan. Note, only applicants that fully complete and submit an entire loan application will receive this advance. The applicant will be required to demonstrate certain qualifications, for example: ability to repay, credit history, substantial economic injury as a result of the disaster, etc.

How is this different than PPP?

The EIDL program varies from the CARES Act Paycheck Protection Program (PPP) in a few important ways. (sample PPP application form)

  1. CARES PPP only applies to 501c3 organizations, whereas all 501c nonprofit organizations are eligible for EIDL.
  2. Although EIDL can provide an advance of up to $10,000, the applicant is still seeking to take out a loan that must be repaid. Under current law, there is no forgiveness beyond the $10,000, and an applicant must certify, among other things, that it can repay the loan.

 One important word of caution: If your organization is exploring both the PPP and the COVID-19 EIDL loan program, please understand that participation in one may affect the participation in the other. You should consult with your financial/tax professionals in completing these applications.

Finally, we expect that the demand for EIDL loans will be far greater than the current supply. Therefore, it is important that you submit your entity’s EIDL application as soon as you can do so thoroughly.

Here you will find a detailed FAQ on this program, including details on how to apply, from Arnold & Porter. Please note, Arnold & Porter has an engagement with both the National Panhellenic Conference and the North American Interfraternity Conference. They provide legal and public policy guidance to these two organizations, they cannot provide legal guidance to individual sorority and fraternity organizations. We recommend that you engage with your own organization’s legal counsel or financial/tax professionals to assist you in making decisions about how to move forward.

Please contact Clark Brown with questions.