Paycheck Protection Program (PPP) vs Full Economic Injury Disaster Loan (EIDL)
We previously sent out a notice that, under the CARES Act that was just passed, borrowers can receive $10,000 in an emergency grant cash advance (an “Advance”) as part of the Economic Injury Disaster Loan (EIDL). While the Advance will still be forgiven if used for appropriate expenses like salaries, wages, and rent, on April 14, 2020 the SBA released additional guidance regarding these emergency cash advances as follows:
To ensure that the greatest number of applicants can receive assistance during this challenging time, the amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.
Given this new limitation, you may be better served applying for a Paycheck Protection Program Loan (PPL Loan) instead.
Here is a comparison of the two loan programs:
PURPOSE
Forgivable if used for payroll (minimum of 75% of the funds received) and the remaining for certain operating expenses (amount of any EIDL advance is not forgivable)
To meet financial obligations and operating expenses that could have been met had the disaster not occurred (amount of any EIDL advance is forgiven)
TERMS
Paycheck Protection Program
Up to $10 million with a 1% interest rate
Up to $2 million with a 3.75% interest rate for businesses & a 2.75% interest rate for non-profits
FORGIVABLE
Paycheck Protection Program
YES
NO – EIDL Loan
YES – EIDL Advance
MATURITY
Paycheck Protection Program
2 years
30 years
FIRST PAYMENT DUE
Paycheck Protection Program
Deferred 6 months
Deferred 1 year
If you need assistance with the foregoing or other COVID 19 issues, you might consider contacting Scott Meyer via the contact form on his bio page.
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