[Updated] The Economic Injury Disaster Loan (EIDL) Program vs The Paycheck Protection Program (PPP) – Comparison Chart

Updated on April 7, 2020 – Following the declaration of a national emergency to combat the Coronavirus (COVID-19) pandemic, the Small Business Administration (SBA) launched the Economic Injury Disaster Loan Assistance (EIDL) program for small business owners in all US states, Washington D.C., and other US territories. EIDL loans are now available. In addition to this loan the SBA is offering an immediate $10,000 advance (the Emergency Economic Injury Grant) within three days of applying for an EIDL. To access the advance, you must first apply for an EIDL and then request the advance. The advance does not need to be repaid.

On March 27th, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a stimulus bill that includes a loan program to keep small businesses afloat during mandated COVID-19-related closures. The CARES Act includes a Paycheck Protection Program (PPP) which authorizes up to $349 billion of federally guaranteed loans to qualifying small businesses. This new loan program is based on the architecture of the SBA’s existing 7(a) loan program and will make forgivable loans of up to $10 million available to qualifying small businesses.

Borrowers may apply for different SBA loans – PPP loans, EIDL loans, non-disaster SBA 7(a), 504 and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). If you accept the EIDL loan, and you subsequently qualify for the PPP loan, you can re-finance the EIDL loan with the PPP loan.

Loans are limited to one per Taxpayer Identification Number.

If you already have a traditional SBA 7(a), 504 or microloan (i.e. a non-disaster SBA loan), under the Small Business Debt Relief Program, the SBA will cover all payments on these SBA loans, including principal, interest, and fees, for six months.

The table below compares the terms of the EIDL and PPP loans:

EIDL PPP
Who is the lender?
The SBA A Bank that is already an SBA lender or any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.
When can I apply?
Now
  • April 3, 2020 for small businesses and sole proprietorships
  • April 10, 2020 for independent contractors and self-employed individuals
  • Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.
Who can apply?
  • Businesses with not more than 500 employees
  • An individual who operates under a sole proprietorship, with or without employees, or as an independent contractor
  • A cooperative with not more than 500 employees
  • An Employee Stock Ownership Plan (ESOP), as defined in 15 U.S.C. 632, with not more than 500 employees
  • A tribal small business concern, as described in 15 U.S.C. 657a(b)(2)(C), with not more than 500 employees
  • An agricultural cooperative, aquaculture enterprise, nursery, or producer cooperative, that is small under SBA Size Standards found at https://www.sba.gov/size-standards
  • A private non-profit organization that is a non-governmental agency or entity that currently has an effective ruling letter from the IRS granting tax exemption under sections 501(c),(d), or (e) of the Internal Revenue Code of 1954, or satisfactory evidence from the State that the non-revenue producing organization or entity is a non-profit one organized or doing business under State law, or a faith-based organization
  • A business with more than 500 employees that is small under SBA Size Standards found at https://www.sba.gov/size-standards
  • Businesses and entities that were in operation on February 15, 2020.
  • Small businesses, 501(c)(3) nonprofit organizations, 501(c)(19) veterans organization, or Tribal businesses that have fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher
  • Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals
  • Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72 (Hotels and Restaurants), for which the affiliation rules are waived
  • Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and company that receives funding through a Small Business Investment Company
What are the affiliation rules?
Affiliation rules become important when SBA is deciding whether a business’s affiliations preclude them from being considered “small.” Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses. Affiliation rules have been waived for:

  • Business concerns that are assigned a NAICS code beginning with 72 (Hotels and Restaurants) – definition changed to 500 employees per physical location
  • Business concerns operating as a franchise that are assigned a franchise identifier code by the SBA
  • Companies that receive funding through a Small Business Investment Company
What is the maximum amount of the loan?
The maximum loan size is $2 million. Applicants who apply for this loan may request an advance of up to $10,000 from the SBA. The advance will be distributed within 3 days. Applicants are not required to repay this advance if they not qualify. The maximum loan size is $10 million. The calculation is as follows:

  • If you were in business February 15, 2019 – June 30, 2019, the max loan is equal to 2.5x the average monthly payroll costs of the 12 months prior to your application. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date
  • If you were not in business between February 15, 2019 – June 30, 2019, the max loan is equal to 2.5x the average monthly payroll costs between January 1, 2020 and February 29, 2020
  • If you took out an EIDL between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the payroll sum.

Payroll includes:

  • Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent)
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Group health care benefits, including insurance premiums
  • Retirement benefits
  • State or local tax assessed on the compensation of employees

Payroll excludes:

  • Employee/owner compensation in excess of $100,000
  • Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code
  • Compensation of employees whose principal place of residence is outside of the U.S.
  • Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act
What is the annual interest rate?
3.75% for businesses, 2.75% for non-profits 1% for the unforgiven portion of the loan
What is the term of the loan?
Up to 30 years 2 years for the unforgiven portion of the loan
When is the first loan payment due?
One year after the loan origination date (interest is accrued during the deferment) At least six months after the loan origination date (interest is accrued during the deferment)
What can we use the loan for?
Financial obligations and operating expenses that could have been met had the disaster not occurred Permitted costs which are:

  • Employee salaries, commissions, or similar compensations (see exclusions above)
  • Health insurance premiums and costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave
  • Payments of interest on any mortgage obligation but excluding any prepayments or payments of principal
  • Rent (including rent under a lease agreement)
  • Utilities
  • Interest on any other debt obligations that were incurred before the Covered Period (as defined below)
Is there a loan forgiveness program?
No Yes – calculated as the amount spent on Permitted costs by the borrower during an 8-week period (the “Covered Period”) after the origination date of the loan
What reduces the forgiveness?
N/A The amount forgiven is reduced based on failure to maintain the average number of full-time equivalent employees versus the period from either February 15, 2019, through June 30, 2019, or January 1, 2020, through February 29, 2020, as selected by the borrower. The amount forgiven is also reduced to the extent that compensation for any individual making less than $100,000 per year is reduced by more than 25% measured against the most recent full quarter. Reductions in the number of employees or compensation occurring between February 15, 2020, and 30 days after enactment of the CARES Act will generally be ignored to the extent that reductions are reversed by June 30, 2020. Forgiven amounts will not constitute cancellation of indebtedness income for federal tax purposes.
How do I get forgiveness?
N/A You must apply through your lender for forgiveness on your loan. In this application, you must include:

  • Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings
  • Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities
  • Certification from an officer of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.
What collateral is required?
The SBA will place a UCC lien against the assets of the business No collateral is required from either the business or its owners
Is a personal guarantee required?
Yes, for loans > $200,000, owners of > 20% of the business, managing members of LLCs, managing partners of LPs. However, no liens will be taken against real estate owned by the guarantor No.
Do I need to have filed my 2019 Taxes to apply?
No, 2019 Taxes do not have to be filed prior to applying for the loan. However, businesses will be asked to submit IRS form 4506T, which provides the SBA with access to historical tax returns Will depend on the lender

Note – This information is supplied to inform our clients and partners.  However, the exact terms of loans are determined solely by the lender(s) and KROST can make no representation as to the accuracy or completeness of any information contained herein.

If you need assistance applying for the Economic Injury Disaster Loan Assistance (EIDL) program or Paycheck Protection Program (PPP), please contact us.

Sources:
https://disasterloan.sba.gov/
https://www.congress.gov/

About the Author

Paren Knadjian, Practice LeaderParen Knadjian
Mergers & Acquisitions, Technology, PPP Forgiveness
Paren is the practice leader of the M&A and Capital Markets group at KROST. He comes with over 20 years of experience in mergers and acquisitions as well as equity and debt financings. In that time, Paren successfully completed over 200 M&A and Capital Markets transactions worth over $1 billion, acting as both a buy-side and sell-side advisor. » Full Bio

46 Comments

  • Can you file for an SBA EIDL to just obtain the $10,000 up front grant and also obtain a PPP forgivable loan?

  • I’m a women owned business owner for over decade.
    Because of Coronavirus I’m having a very very difficult times.. I would to get a disaster loan program…

    • Hi Nancy, I’m so sorry to hear about your situation. Our thoughts are with you. I’ve forwarded your comment to our experts. They will be in touch directly.

  • I read the information closely, however, I’m still am not quite sure which way to go. I only have one employee, PT but I would not want to lose her. I think at this time a loan with the highest chance of forgiveness would be my better choice.

    • Mark, I understand how confusing this must be. I’ve forwarded your message on to our experts. They will be in touch directly. Best of luck!

  • I have a business in Gainesville Florida I want to know if you do any assistance there I want to apply for both loans thank you

    • Hi Craig, I’ve passed your message along to our experts. They will be in touch with you directly. Thank you for reaching out.

  • I filed for my company last week 2000466767 on the original site . All of my information has been sent in . How do I check on the status. I appreciate any help. Rachel J Webster Rehoboth toy and Kite co, inc ein 01-0658980

    • Hi Rachel, thank you for your comment. I’ve passed your message along to our experts. They will reach out to you directly.

  • This was a very helpful side by side, thank you for putting it together. Just an FYI that I think there is a typo in this section, I assume it should say that COULD NOT

    What can we use the loan for?
    Financial obligations and operating expenses that could have been met had the disaster not occurred

  • Loans forgiven are forever or there is a provision to recoup these firgiveness?

    • Mitesh, I’ve sent this message on to our experts. They will reach out directly. Thank you.

  • What happens if you apply for the EIDL and request the $10,000 advance but end up going with the PPP not going with the EIDL? Do you have to pay the $10,000 back? Can you just withdraw your application and go with the PPP?

    • Adam, thank you for your message. I have sent this comment to our experts and they will reach out directly.

        • Hi Harrison, as we work through the questions, yes, we will. Thanks for your comment and suggestion.

      • First of all, thank you so much for putting this comparison together. It makes it all so much easier to understand! I had the same question as Adam regarding the $10,000 advance. Does that roll into any allotted amount received through the PPP if I were to qualify and accept it over the EIDL, or would it need to be claimed as income if kept?

      • Admin,
        I had the same question Adam Baker mentioned. Could you please include me in this answer? Thanks!

        • You can apply for the EIDL loan, get $10k, apply for the PPP loan, decide which one you want (if you qualify for both) and keep the $10k under all circumstances.

    • I would also like to know the answer to this question about repayment of the $10,000 EIDL advance, if if a later decision is made to go with the PPP.

    • I would also like to know the answer to the same question as above Yep after applying for the $10,000 EIDL loan will I have to pay this back or can it be part of the PPP loan/Grant

      • You can apply for the EIDL loan, get $10k, apply for the PPP loan, decide which one you want (if you qualify for both) and keep the $10k under all circumstances.

  • I would like to get more info about these . I own a business with one employee . In this time I feel like I am going to lose her . Please help .

  • Hours of research and this is the best information I’ve found. Thank you!
    I’m a partner in an LLC… would partner guaranteed payments (reported on K-1) qualify for payroll protection under the PPP?

    • Hi Caleb, we recently updated the chart and I believe the changes will answer your question. Thank you for commenting and good luck!

  • What happens if you apply for the EIDL and request the $10,000 advance but end up going with the PPP not going with the EIDL? Do you have to pay the $10,000 back? Can you just withdraw your application and go with the PPP?

    • Hi Tyler, we recently updated the chart and I believe your question can be answered with those changes. Thank you!

  • Your article states that “Please note that businesses cannot get both EIDL and PPP loans at the same time.”. I have read other articles that state we can take advantage of both loans as long as we don’t use the funds for the same expenses. For example, the PPP loan could be used for wages and the EIDL loan could be used for other operating expenses. Can you confirm that we cannot use the PPL for payroll cost while also taking advantage of the EIDL loan to cover other expenses that we could have paid had the disaster not occurred?

    • Hi Mickey, We recently updated the chart and I believe the changes address your question. Thank you for your comment.

  • We’ve just started our business since Jan 8th, 2020. Can we apply for the PPP loan and calculate our payroll costs based on those months?

    • Hi Anh, we’ve updated the comparison chart with this information. Hopefully that helps!

  • I have the same question as Adam Baker:
    “What happens if you apply for the EIDL and request the $10,000 advance but end up going with the PPP not going with the EIDL? Do you have to pay the $10,000 back? Can you just withdraw your application and go with the PPP?”

    • You can apply for the EIDL loan, get $10k, apply for the PPP loan, decide which one you want (if you qualify for both) and keep the $10k under all circumstances.

    • You can apply for the EIDL loan, get $10k, apply for the PPP loan, decide which one you want (if you qualify for both) and keep the $10k under all circumstances.

  • Same question as Adam: What happens if you apply for the EIDL and request the $10,000 advance but end up going with the PPP not going with the EIDL? Do you have to pay the $10,000 back? Can you just withdraw your application and go with the PPP?

    • You can apply for the EIDL loan, get $10k, apply for the PPP loan, decide which one you want (if you qualify for both) and keep the $10k under all circumstances.

    • Yes. You can apply for the EIDL loan, get $10k, apply for the PPP loan, decide which one you want (if you qualify for both) and keep the $10k under all circumstances.

Comments are closed.