4 Questions Gyms Asked the SBA About Recent EIDL Changes

In early September, Small Business Administration (SBA) made some changes to the COVID Economic Injury Disaster Loan (EIDL) Program.

By working with the SBA and various health and fitness club owners, IHRSA successfully advocated for program adjustments to allow more fitness business owners to gain relief during these difficult times.

To raise awareness of all the recent changes and what they mean for potential applicants, IHRSA joined forces with the SBA to host a webinar and clear up any confusion. You can watch the full webinar on-demand, but we wanted to share four questions the SBA representative answered from fitness professionals in attendance.

1. Are health clubs, gyms, or studios that opened in 2021 eligible for a COVID EIDL?

2. What are the EIDL affiliation requirements?

3. Will the EIDL changes retroactively apply to loans businesses received last year?

4. When should gyms apply for EIDL, and is there a timeline?

The below answered are taken directly from the webinar but have been lightly edited for clarity.

Are health clubs, gyms, or studios that opened in 2021 eligible for a COVID EIDL?

Unfortunately, no. Having your business in operation by January 2020 is a set eligibility requirement.

What are the EIDL affiliation requirements?

Now affiliation requirements for EIDL are based on ownership. That's what makes this easier.

Normally, affiliation is a totality of the circumstances. As a result, it looks at not just the operating entity applicant but ownership interest of 20% or more, and whether those ownership interests of 20% or more have interest in other operating entities that exceed 50% or more. If so, that is normally considered under SBA Rules as an affiliated entity.

So for purposes of this program, we took the plain language from the Restaurant Revitalization Fund, which says if the operating entity applicant—not the ownership interest that makes up the operating entity applicant—owns 50% or more of another operating entity, it should be listed as an affiliate.

The distinction between the two examples is that one is a much more invasive review of the various affiliations that could impact cash flow or size standards by looking at the ownership interests that make up an operating entity. The other example looks at the operating entity itself at that level and whether or not that business entity owns 50% or more.

There are other rules in place to limit the broadness of that affiliation.

• Size standards: which limits it to 20 locations or less 500 employees, and

• When seeking loan amounts over $200,000, any ownership greater than 20% will need to provide a personal guarantee.

But for purposes of affiliation, there's a very simple definition. And unless the operating entity applicant owns 50% or more of another operating entity, it can be that you do not need to list any additional affiliates. So that is the rub, as it were.

Will the changes retroactively apply to loans businesses received last year?

Yes, if you have any COVID EIDL funds remaining from having applied and obtained them a few weeks ago, a few months ago, for some reason, you still have funds, you can use those funds on the debt payments. The 24-month deferment is automatic across the board.

Watch the full on-demand webinar for a step-by-step walkthrough of the intake and verification process.

Ultimately, for this to pan out, you'll need your tax documents to verify your business permission. The more the information on your application intake form for COVID EIDL to match to your tax document, the less likely you'll run into more follow-up questions from the SBA.

It'll be a smoother process.

The current ownership needs to add up to 100%. So if one person owns everything, that one person owns 100%, make sure that adds up to 100% when filling out your bank information. Also, be mindful of not having typos and putting in the correct bank information because changing that will significantly delay your process.

After completing the intake form, you will get an email from disastercustomerservice@sba.gov, and you will create a username for the portal. The portal is where you'll upload documents and know the status of your loan.

I just want to end with a few notes on some things that we're noticing.

1. If you're applying for over $500,000, you need to submit all four documents for the SBA to consider your application "submitted" and kick it over to the review cycle.

2. There are circumstances where someone might not see a button in the portal for requesting more funds. Now that the cap has been increased, perhaps you're coming back for more funds—up to $1 million—and you will see the ability to request more funds in the portal. Some people might not see the request more funds button. There are some reasons for that. If you already have an outstanding loan application or increase request in process, you won't see the button. Another reason is you may have already reached the maximum amount that you're eligible for.

When should gyms apply for EIDL, and is there a timeline?

The answer is now. If it's useful for you, apply now.

The program is open until December 31, 2021, and there are only a certain amount of funds. If the program could benefit your business, you have no reason to wait. It's going to take a bit, so start now so you can get your fund sooner than later. Time is what I recommend.