Economic Injury Disaster Loan and Main Street Lending Programs

Marty McCarthy, CPA, CCIFP
Focused on You. Dedicated to Your Success.
June 25, 2020

As we advised you yesterday, businesses can get much needed assistance from the Small Business Administration and Federal Reserve. Here is information on the Economic Injury Disaster Loan and Main Street Lending Programs.

Economic Injury Disaster Loans
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories can apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance is designed to provide economic relief to businesses that are currently experiencing a temporary loss of revenue. This loan advance will not have to be repaid. Recipients do not have to be approved for a loan to receive the advance, but the amount of the loan advance will be deducted from total loan eligibility. SBA began accepting new Economic Injury Disaster Loan (EIDL) and EIDL Advance applications on June 15 to qualified small businesses and U.S. agricultural businesses.

The new eligibility for U.S. agricultural businesses is made possible because of the latest round of funds appropriated by Congress in response to the COVID-19 pandemic. 

Applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis. For agricultural businesses that submitted an EIDL application through the streamlined application portal prior to the legislative change, SBA will process these applications without the need for re-applying. You can apply for a EIDL loan on the SBA’s website

EIDL loans are capped at $150,000. The loans can be used to pay debts, payroll, and other bills — including items not covered by the Paycheck Protection Program (PPP). The disaster loans are offered at a 3.75% interest rate for businesses and 2.75% interest rate for nonprofits.

Although EIDL loans are tax-free, the tax status of the advances is not clear. 

Main Street Lending Program
The Federal Reserve established the Main Street Lending Program to support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic. The Program will operate through three facilities: the Main Street New Loan Facility (MSNLF) , the Main Street Priority Loan Facility (MSPLF) , and the Main Street Expanded Loan Facility (MSELF) .

The Federal Reserve has expanded its Main Street Lending Program to provide another level of assistance to help small and medium-size businesses weather the coronavirus pandemic. As announced on June 8, the changes include:
  • Lowering the minimum loan size for certain loans to $250,000 from $500,000.
  • Increasing the maximum loan size for all facilities.
  • Increasing the term of each loan option to five years, from four years.
  • Extending the repayment period for all loans by delaying principal payments for two years, rather than one.
  • Raising the Reserve Bank’s participation to 95% for all loans.

Lenders can register for the program on the Main Street lender portal . Borrowers can complete the Main Street Lending Program Forms and Agreements to be considered for a loan. 

The Main Street Lending Program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act.

Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at Richard.Higgins@MCC-CPAs.com . I can be reached at Marty.McCarthy@MCC-CPAs.com As always, we are happy to help.
 
Stay safe,
 
Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company
 
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).