Facts about EIDL pandemic assistance for CPAs
Economic Disaster Lending (EIDL) has provided many small businesses with the capital they need to stay afloat amid the economic fallout from the COVID-19 pandemic.
Eight percent of CPAs surveyed as part of the AICPA Business and Industry Outlook for the Second Quarter survey said they used EIDL funding during the pandemic.
That’s a far cry from the 56% who turned to the Paycheck Protection Program (PPP) for relief, but EIDL nonetheless represents an alternative that has been helpful to many small businesses.
AICPA has created a Resource to help increase awareness and understanding of the EIDL program for CPAs and their clients. The resource also compares EIDL to other popular lending programs such as PPP and the Main Street Lending Program (MSLP). Here are some things CPAs should know about EIDL:
- The interest rate is low. The interest rate is 3.75% APR for most borrowers and 2.75% for nonprofits. The maximum loan amount is currently $ 150,000. Under normal circumstances, companies can borrow up to $ 2 million, but due to the coronavirus crisis, the US Small Business Administration (SBA) has significantly reduced the maximum amount to be able to help more borrowers. The EIDL program is available to companies with 500 employees or less.
- The term is long. EIDL offers one of the longest terms of emergency loans available for 30-year pandemic relief. A 12 month deferral is also available for interest and principal payments.
- It is available for Sec. 501 (c) (6) organizations. Unlike PPP, EIDL makes assistance available to non-profit organizations that are exempt under Sec. 501 (c) (6) of the Internal Revenue Code. These include trade leagues, chambers of commerce, real estate chambers, chambers of commerce, and professional football leagues.
- Borrowers must prove the economic damage. To qualify for EIDL assistance, companies must prove that they were unable to meet their operating expenses due to the disaster (in this case, the pandemic). “Some organizations, despite the pandemic, have been able to maintain their operations,” said Kari Hipsak, CPA, CGMA, a senior executive at the Association of International Certified Professional Accountants who helped create the AICPA. EIDL resource. “If they have not technically suffered economic harm and do not have difficulty meeting their expenses, they might not be able to tick this box.”
- There is no “double dipping” with EIDL and PPP. Although companies can use EIDL to cover expenses that were not covered by the PPP, they cannot use EIDL and PPP funds to cover the same expenses. This is called “double deduction” and leaves businesses exposed to fraud charges. In addition, any advance from EIDL up to $ 10,000 will reduce the cancellation of the PPP loan.
While PPP loans are attractive because they are forgivable under certain circumstances, the 30 year term and availability of Sec. The 501 (c) (6) organizations give EIDL an important niche in the coronavirus relief safety net.
CPA firm staff can provide information to help clients understand the nuances of the help available.
“Accountants can’t make decisions for clients,” Hipsak said. “But clients have so much on their minds right now that if CPAs can at least show them what their options are, it helps relieve some of the pressure from clients of not knowing where to go for help. . “
AICPA experts discuss the latest news on PPP and other small business support programs at a virtual weekly town hall. The webcasts, which offer CIP credits, are free to AICPA members. Go to AICPA Town Hall Series web page for more information and to register.
the AICPA Paycheck Protection Program Resource Page houses resources and tools produced by the AICPA to help cope with the economic impact of the coronavirus.
For more information and stories on the coronavirus and how CPAs can handle the challenges of the pandemic, visit JofA‘s coronavirus resource page or subscribe to our email alerts for the latest PPP news.
– Ken tysiac ([email protected]) is the JofAeditorial director of.