Understanding the latest two rounds of EIDL Advances

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Last May I shared my successful Economic Injury Disaster Loan experience, which included a $1,000 “EIDL Advance” that doesn’t have to be repaid and a $3,000 30-year low-interest loan. It took about a month and a half for the money to show up in my checking account, but other than that the process was fairly seamless, and the Small Business Administration (the agency administering the program) is the most well-staffed bureaucracy in the federal government so it was easy to contact them whenever I had any questions about the program.

Congress allocated an enormous amount of money to EIDL and its sister program, the Paycheck Protection Program, but since the programs were completely new, the first round of grants and loans were designed very conservatively to ensure that all eligible business were able to participate. In practice, that meant EIDL Advance and loan amounts were based on the number of employees: businesses were eligible for grants of $1,000 per employee (up to $10,000), and loans of $3,000 per employee (an arbitrary number designed to ensure all eligible businesses were funded).

It turned out, this deliberately conservative design left the SBA with an enormous amount of appropriated money they have to get out the door before the program expires. Enter the Targeted EIDL Advance and the Supplemental Targeted EIDL Advance.

Targeted EIDL Advance

On April 2, 2021, I was invited to apply for a “Targeted EIDL Advance.” Remember that EIDL Advances were capped at $10,000, but Congress didn’t give any guidance about who would receive how much. For whatever reason, the SBA decided to use number of employees (rather than size of payroll, cost of living, or astrological sign) as the basis for determining Advance and loan amounts. But that didn’t change the maximum amount businesses were eligible for, which remained $10,000.

Enter the TEIDLA: an opportunity for businesses that received less than $10,000 in the first round of EIDL Advances to be “topped up” to the maximum $10,000 amount, as long as they met three criteria:

• located in a low-income census tract;
• 30% drop in revenue year-over-year during any 8-week period beginning March 2, 2020;
• fewer than 300 employees.

The last two are self-explanatory and easy to manipulate so let’s focus on the first requirement, which will do the most to exclude businesses from eligibility. SBA chooses to express this requirement as being located “in a low-income community,” but this is incorrect. It does not matter in the slightest whether your “community” is low-income or not. Eligibility hinges on whether you’re located in a low-income census tract.

This is easy enough to look up using the tool they provide, although one thing to be aware of is that you can’t just plug in your ZIP code to determine eligibility — that’s far too crude a measure. You have to plug in your exact address, since even buildings on opposite sides of the same street may fall into different census tracts.

To use my own case as an example, last summer I moved about three quarters of a mile, remaining within the same ZIP code, let alone the same “community.” But my old address fell within a non-low-income census tract, and my new census tract is classified as low-income, making me eligible for a Targeted EIDL Advance.

This actually caused a small issue on my application. After submitting my TEIDLA application on April 2, I finally heard back from SBA on June 30, and was told that I was ineligible since I wasn’t located in a low-income census tract. The reason is that when you create an EIDL account, your business is permanently associated with the address you give. I had updated my contact information to my new address (one of the only things you can do online), but that didn’t update the address associated with my business.

Fortunately, as I mentioned, SBA is the most well-staffed bureaucracy I’ve ever encountered and I was able to resolve the discrepancy in a matter of minutes by e-mailing a PDF of the first page of a credit card statement showing my new address, and the funds were disbursed within a few days (it might have been even quicker if not for the Independence Day holiday).

Supplemental Targeted EIDL Advance

To clear out the last of the money rattling around their coffers, SBA introduced a third EIDL Advance program with even narrower eligibility requirements:

• located in a low-income census tract;
• 50% “economic loss” year-over-year during any 8-week period beginning March 2, 2020;
• fewer than 10 employees.

I’m not sure why they express the financial eligibility in terms of “economic” loss instead of revenue loss as they do with the TEIDLA, but I assume they’re measuring the same thing in both cases.

As you can see, logically STEIDLA-eligible businesses are a subset of TEIDLA-eligible businesses: all business with fewer than 10 employees also have fewer than 300 employees, and all business that suffered a 50% drop in revenue also suffered a 30% drop in revenue.

How this works in practice is that all EIDL Advances are cumulative, up to a maximum of $15,000:

1. EIDL Advance: all small businesses are eligible for $1,000 per employee, up to $10,000.
2. Targeted EIDL Advance: subset of businesses are eligible for the remaining difference between $10,000 and the amount received in #1.
3. Supplemental Targeted EIDL Advance: subset of TEIDLA-eligible businesses are eligible for a flat $5,000 on top of the $10,000 received in #1 and #2.

I received my invitation to apply for STEIDLA within minutes of my TEIDLA application being approved, and applying was even simpler than submitting my EIDL and TEIDLA applications. Literally all that was required was clicking the link in the e-mail, entering my IRS Employer Identification Number, and checking a box. I just submitted the application this morning (I wanted to make sure my TEIDLA was deposited first) and unfortunately it already appears in my SBA account as “Declined,” presumably based on the income information I submitted with my TEIDLA application back in April.

Conclusion

Finally, I want to mention in passing that in addition to these new grants, SBA has also made additional money available to borrow. I have not explored that part of the program beyond my original $3,000 loan, but if you’re an EIDL participant you should now see a button in your account saying “Request more funds.”

Personal finance columnists love to rail against debt, but you won’t hear that nonsense from me. As far as I’m concerned, EIDL loans check all the boxes for “good debt:” unsecured (as long as you borrow less than $25,000), long-term, and low-interest loans are a fantastic way to pay off higher-interest, revolving, or secured debt. For example, if you have high-interest private student loans, which are notoriously difficult to discharge in bankruptcy, and pay them off with an unsecured low-interest EIDL loan, that’s an absolute improvement in your overall financial condition. People seem to find this concept easier to understand when it comes to, for example, refinancing mortgage debt at lower interest rates, but the exact same principle applies everywhere: if being debt-free is out of reach, then seizing every opportunity to swap good debt for bad debt is the next best thing.

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