PPP -v- EID Loan

Business owners, independent contractors and self-employed individuals need to know these two acronyms.

• Paycheck Protection Loan (PPP)
• Economic Injury Disaster Loan (EIDL)

These are two loan programs afforded by the Small Business Administration (SBA); one is new, the other is not.

At this point, most business owners know about these two SBA loans, and the question we are being asked today is:

• Is it possible to apply for both loans?

The short answer is: YES.

There is a great deal of confusion around this question.

The loans are different, and each has its own guidelines and repayment rules.

The PPP loan is very narrow in how it is calculated and what it may be used for:

• Payroll
• Rent
• Utilities
• Mortgage payments

The EIDL may be used for other things like cost of goods sold, vendor payments, supply chain payments.

The PPP is, potentially, 100% forgivable. I say “potentially” because the funds must be used for the specified purposes and employment must remain at a certain level in order for the debt forgiveness to take place.

Only $10,000 of the EIDL is forgivable.

What a business owner may NOT do is apply for both loans for the same purposes. For instance, if a business owner applied for and received a PPP loan to cover payroll through June 30, 2020, but also applied for an EIDL to cover payroll for that same period, the result could be that the PPP loan is NOT eligible for forgiveness.

The two loans may not be used for the same expenses for the same period of time if loan forgiveness is the goal.

However, each business must determine based on the uniqueness of its operations whether either one of the loans are appropriate or if application for both loans is appropriate.

Of course, if you have questions about your particular situation and business, we are here to help.

Stay safe!