Can You Get an EIDL Grant Without Taking the Loan?
When the COVID-19 pandemic disrupted businesses across America, the Economic Injury Disaster Loan (EIDL) program became a crucial lifeline for millions of small business owners. But many entrepreneurs faced a dilemma: they needed immediate cash relief but weren't ready to take on additional debt. This raised an important question—could you receive the EIDL grant without accepting the loan?
The short answer is yes, you could. Understanding how this worked can still provide valuable insights for business owners navigating disaster relief programs or planning for future emergencies.
What Was the EIDL Grant?
The EIDL Advance, commonly called the "EIDL grant," was a cash advance program designed to provide immediate financial relief to businesses affected by COVID-19. Unlike traditional loans, this advance didn't need to be repaid—even if your EIDL loan application was denied or you chose not to accept the loan.
The grant provided up to $10,000 based on a simple formula: $1,000 per employee, capped at 10 employees. This meant a sole proprietor could receive $1,000, while a business with 10 or more employees qualified for the full $10,000.
The Two Types of EIDL Advances
As the program evolved, the SBA introduced two additional grant opportunities:
Targeted EIDL Advance: Provided an additional $10,000 to businesses in low-income communities that experienced revenue losses exceeding 30% and employed 300 or fewer workers.
Supplemental Targeted Advance: Offered an extra $5,000 to businesses in low-income communities with revenue losses exceeding 50% and 10 or fewer employees.
Combined, qualifying businesses could receive up to $15,000 in grant funds without accepting any loan.
The Application Process: How to Get the Grant Without the Loan
Applying for the EIDL grant required submitting an EIDL loan application—but accepting the loan was entirely optional. Here's how the process worked:
Step 1: Complete the EIDL Loan Application
You had to apply for the EIDL loan to access the grant. During the application, you provided:
- Basic business information (name, address, industry)
- Employee count (this determined your grant amount)
- Revenue figures and economic injury details
- Owner information and verification
The application typically took 30-45 minutes to complete online through the SBA's COVID-19 relief portal.
Step 2: Request the Advance Grant
During Step 3 of the application ("Additional Information"), a checkbox for requesting the Emergency EIDL Grant was automatically selected. This checkbox indicated you wanted to receive the advance.
Critical detail: Your email address needed to be correct. All communication about your grant—including approval and disbursement notifications—came via email.
Step 3: Wait for Processing
The SBA processed applications in the order received. During peak periods in 2020, processing times varied from a few days to several weeks. The grant advance was supposed to arrive within three days of your request, though delays were common during high-volume periods.
Step 4: Receive Your Grant (No Loan Required)
The grant was deposited directly into the bank account you provided on your application. This happened independently of your loan approval status.
What About the Loan Offer?
Here's where strategy became important. After your application was processed, you'd receive a loan offer if approved. At this point, you had several options:
Option 1: Accept Only the Grant
If you received your grant deposit before getting a loan offer, you could simply ignore or decline the loan. The grant was yours to keep regardless.
Option 2: The "$1 Strategy"
Some applicants used a workaround to ensure they received their grant while minimizing loan obligations. When the loan offer arrived, they'd use the slider tool to adjust the loan amount to just $1, then accept that minimal amount.
Why? Early in the program, some business owners reported that rejecting the loan outright might cancel their pending grant application. Accepting $1 ensured the system processed everything correctly while creating virtually no debt obligation.
Option 3: Wait to Decline
Important: If you wanted only the grant but hadn't received it yet, you should not have rejected the loan offer immediately. The safer approach was waiting until your grant deposit cleared, then declining the loan.
Grant Eligibility Requirements
Not every business qualified for the EIDL grant. To be eligible, you needed to:
- Be a small business, nonprofit, or agricultural business located in the United States
- Have 500 or fewer employees (though some industries had different size standards)
- Have suffered economic injury due to COVID-19
- Have been in operation before January 31, 2020
For the Targeted EIDL Advance, additional requirements included:
- Location in a low-income community
- Revenue loss exceeding 30% during an eight-week period
- 300 or fewer employees
- Having received an EIDL loan or advance previously
The Supplemental Targeted Advance required:
- Location in a low-income community
- Revenue loss exceeding 50%
- 10 or fewer employees
- Having received the full Targeted EIDL Advance
How Grant Amounts Were Calculated
Your grant amount depended on your employee count as reported in the "Business Information" section of your application.
Key distinction: Only W-2 employees on your payroll counted toward this calculation. Independent contractors, 1099 workers, and owner compensation didn't factor into the employee count for grant purposes.
This meant:
- Sole proprietors with no employees: $1,000
- Business with 3 employees: $3,000
- Business with 10+ employees: $10,000 (maximum)
For the Targeted Advance, eligible businesses received a flat $10,000 regardless of employee count, provided they had received less than $10,000 in the original EIDL grant.
Tax Implications of EIDL Grants
One of the most attractive features of EIDL grants was their tax treatment. The advances were not considered taxable income at the federal level.
Additionally, businesses could deduct expenses paid with EIDL grant funds on their tax returns—a benefit that initially wasn't available for PPP loan proceeds. This made the grants particularly valuable from a tax planning perspective.
However, tracking how you spent these funds remained important for:
- Your own records and financial planning
- State tax purposes (some states had different rules)
- Potential future audits or inquiries
Common Mistakes to Avoid
Business owners encountered several pitfalls when navigating the EIDL grant process:
Mistake 1: Incorrect Employee Count
Some applicants inflated their employee count hoping for a larger grant, only to face issues later when the SBA verified payroll records. Always report accurate W-2 employee numbers.
Mistake 2: Wrong Bank Account Information
Typos in routing or account numbers caused significant delays. Some business owners didn't receive their grants for months because funds went to incorrect accounts.
Mistake 3: Rejecting the Loan Too Quickly
As mentioned earlier, some applicants who immediately rejected loan offers experienced grant application complications. The safer strategy was waiting for grant confirmation before declining the loan.
Mistake 4: Missing Email Notifications
Since all communication came via email, missed messages about additional documentation requests or grant status could delay or derail applications. Checking spam folders and ensuring correct email addresses was crucial.
What Happened to EIDL Grants?
The original EIDL grant program closed in July 2020 when allocated funds were exhausted. The SBA continued accepting EIDL loan applications, but new grant advances were unavailable.
Later, Congress authorized the Targeted EIDL Advance program, which opened in early 2021 for qualifying businesses in low-income areas. This program also eventually closed when funds were depleted.
On January 1, 2022, the SBA stopped accepting new applications for COVID-19 EIDL loans and all related grant programs. The program is now closed to new applicants.
For businesses that received grants, no repayment is required. These funds remain yours regardless of what happened with your EIDL loan (if you took one).
Lessons for Future Disaster Relief Programs
While the COVID-19 EIDL program has ended, understanding how it worked provides valuable insights for business owners facing future emergencies:
Build a Documentation System Early
Having organized financial records made the EIDL application process much smoother. Businesses with clear documentation of:
- Employee counts and payroll records
- Revenue figures and bank statements
- Business formation documents
- Tax returns
...could complete applications quickly and accurately.
Understand Grant vs. Loan Structures
Many disaster relief programs combine forgivable grants with traditional loans. Knowing you can often accept grants while declining loans gives you more flexibility during crisis periods.
Keep Emergency Contact Information Updated
Critical notifications about relief programs come via email, mail, or phone. Maintaining current contact information with the IRS, your state business registry, and any professional organizations ensures you don't miss important opportunities.
Monitor Multiple Relief Channels
EIDL grants weren't the only COVID-19 relief option. Businesses that stayed informed about multiple programs (PPP, state grants, local initiatives) could maximize their support. Subscribing to SBA updates, industry newsletters, and small business association communications keeps you informed.
Keep Your Financial Records Organized
Whether you're managing disaster relief funds, regular business operations, or planning for tax season, maintaining clear financial records makes everything easier. Proper bookkeeping helps you:
- Quickly respond to relief program applications
- Track how emergency funds were spent
- Maximize tax deductions on business expenses
- Make informed decisions about taking on debt
Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data. Unlike traditional accounting software, your records remain in readable text files you fully own—no proprietary formats or vendor lock-in. Get started for free and experience accounting built for clarity and control.
Final Thoughts
The EIDL grant program demonstrated how government relief can provide immediate cash without forcing businesses into debt during crises. While you needed to apply for the loan to access the grant, accepting that loan was never required.
For the millions of businesses that received EIDL grants, these funds provided crucial breathing room during unprecedented economic challenges. The program's structure—separating forgivable grants from traditional loans—offered flexibility that many business owners needed.
Although new EIDL applications are no longer accepted, the lessons learned about disaster preparedness, financial documentation, and strategic decision-making during crises remain valuable for every business owner.
Sources:
