Paycheck Protection Program &

Economic Injury Disaster Loans

How will you decide between the Economic Injury Disaster Loans (EIDL) and the Paycheck Protection Program (the PPP)? Which will be better for your business?

*The information on this page  is for educational purposes only and is not legal advice.

 The CARES Act provides much needed relief for small businesses during the COVID-19 crisis and there are many options for businesses to utilize in order to maintain employee levels, pay expenses, defer taxes, and more. The PPP and EIDL offer  financial relief for businesses during this crisis, but both have limitations and neither are right for every business. Some businesses may even want to take advantage of both.

Paycheck Protection Program

More money which can be forgiven:

Maximum loan amount = 2.5x your average monthly payroll costs from the last year (plus any EIDL loan between January 31, 2020 and April 3, 2020), capped at $10 million.

The loan amounts will be forgiven as long as:

  • he loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made;

  • employee and compensation levels are maintained (or quickly rehire);and

  • reduced by amount of EIDL grant received

More restrictive uses of funds:

75% must be used for payroll costs; the rest can be used for:

  • payment of interest on any mortgage obligation incurred before February 15, 2020

  • rent payments under leasing agreements entered into before February 15, 2020

  • utility payments (electricity, gas, water, transportation, telephone, or internet services which started before February 15, 2020)

Terms:

Not secured

No personal guarantee

 

Interest Rate:

  • 1.00% fixed rate

Repayment:

  • Deferred for 6 months

  • Repayment period of 2 years

 

Application

Opened April 3, 2020, apply through local lenders

Fewer additional benefits:

No Payroll Tax Deferral (if loan forgiven)

No Employee Retention Tax Credit

A PPP Loan does not preclude an EIDL Grant/Loan

Economic Injury Disaster Loan

Grant up to $10,000 plus low interest loan:

Up to $10,000 for EIDL advance/emergency grant which will not have to be repaid, even if not accepted for an EIDL loan

Less restrictive uses of funds:

  • paid sick leave

  • maintaining payroll to retain employees during business disruptions or substantial slowdowns

  • meeting increased costs to obtain material unavailable from original source due to interrupted supply chains

  • make rent or mortgage payments;and

  • repaying obligations that cannot be met due to revenue losses

Terms:

Not secured, up to $25,000

No personal guarantee, up to $200,000

Interest Rate:

  • 3.75% for small businesses.

Repayment:

  • Deferred for a year

  • Repayment period of up to 30years

 

Application

Available now through U.S. SBA

Access to additional benefits:

Employee Retention Tax Credit

Employee Payroll Tax Deferral

An EIDL Grant/Loan does not preclude a PPP Loan

Call, email, or schedule a call to get started today.

This is a non-exhaustive list of the differences between these two programs. Businesses can take advantage of both the EIDL and PPP- if the funds are for different purposes. Reach out to discuss the nuances of the two programs and which option is best for your business.

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