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)
No personal guarantee
1.00% fixed rate
Deferred for 6 months
Repayment period of 2 years
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
Not secured, up to $25,000
No personal guarantee, up to $200,000
3.75% for small businesses.
Deferred for a year
Repayment period of up to 30years
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.