There are two different types of government business loans available to help small businesses stay afloat during the coronavirus emergency that are quite different in nature. The Paycheck Protection Program loans provide funding to continue paying employees during the crisis and the Economic Injury Disaster Loans provide vital economic support to help overcome the temporary loss of revenue businesses are experiencing as a result of the COVID-19 pandemic. The table below provides a side-by-side comparison of these loans followed by details of both.
PPP – EIDL COMPARISONS | ||
Paycheck Protection Program Loan (PPP) | Economic Injury Disaster Loan (EIDL) | |
Qualifying Business | 500 or fewer employees; Active on 2/15/2020 |
500 or fewer employees |
Ineligible Businesses | Cannabis, lenders, pyramid, household employers, those with prior SBA defaults and certain criminal activities. | Gambling concerns (more than 1/3 income from gambling), all casinos, racetracks, poker parlors, etc. |
Program Duration | Available through 6/30/20 | Unknown at this time |
Max Loan Amount | $10 Million | $2 Million |
Borrower Loan Amount | 2.5 times average 2019 payroll | Decided by SBA based upon need determined by submitted documents. Can project need for one year |
Payroll/Employee Definition (Does not include independent contractor or payments) |
All salary, wages, commissions and tips including most benefits, capped at $100K for each employee. Does not include FFCR Act leave payroll. | Includes both full-time and part- time employees. |
Interest Rate | 1% | 3.75% for Small Business 2.75% for Non-Profits |
Loan Term | 2 Years | Up to 30 Years |
Loan Guarantees or Collateral Required | None, other than a borrower certification | None for loans of $25,000 or less. Above that determined by SBA depending on circumstances. |
Loan Advance | None | $10,000 before loan approval |
Loan Forgiveness | The lessor of the loan amount or the sum of the expenses including payroll, mortgage interest, rent, and utilities paid in the 8-week period following the loan origination date. | The $10,000 advance - forgiven at the discretion of the SBA. If a borrower also has a PPP loan, the $10,000 forgiveness will be deducted from the PPP loan forgiveness amount. |
Forgiveness Reduction | Reduced if full head count decreases or salaries are decreased by more than 25% | Not applicable |
Payment Deferral | 6 to 12 months | Up to 12 months Determined by the SBA |
Allowable Loan Uses | Payroll costs, mortgage interest*, rent/lease payments*, Utilities* including electric, water, telephone, internet. *In place before 2/15/20 |
Fixed debts, payroll, accounts payable, insurance, interest and other general operating expenses. Not to be used for lost sales or profits or expansion. |
Coordination with the employee retention credit | Makes employee ineligible for the employee retention credit | Not applicable |
CAUTION: A Paycheck Protection Loan makes an employer ineligible for the employer retention credit created in the CARES Act.
Economic Injury Disaster Loans (EIDL)
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan with an advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application.
The SBA’s Economic Injury Disaster Loan program provides vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic.
This program is for any small business with no more than 500 employees (including sole proprietorships, independent contractors and self-employed persons), and private non-profit organizations ((501(c), (d) or (e)) or 501(c)(19) veterans’ organizations affected by COVID-19.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
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