Can You Apply for Both Eidl and Ppp

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Jan 7, 2022 – This commodity has been updated with new guidance released by the SBA on January 6, 2021.

Wondering what the difference is betwixt Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans? Or need help deciding which (or both) type of SBA coronavirus loan your business should apply for? Read on to compare/contrast these two different Small Business Assistants loans for minor business coronavirus relief and decide which is better for your needs, so you can apply for it.

EIDL VS PPP Loans: What's The Difference?

Businesses affected by COVID tin apply for loans through the EIDL and PPP programs, which were funded by the CARES Act in 2022 until the funds ran out in August. The $900 billion stimulus package passed in late Dec revives and restructures a number of COVID-related relief programs, including PPP.

EIDLs can reach $2 million. While the master part of the EIDL has to be repaid, the $10,000 EIDL advance is automatically forgiven. PPP loans tin reach upwardly to $10 one thousand thousand and are 100% forgivable if the borrower follows loan forgiveness rules laid out by the SBA.

The EIDL is meant to assistance businesses cover half-dozen months of operational expenses. Yous do have the pay the money back, eventually. Yous can, however, too employ for an EIDL grant through the EIDL program. This grant doesn't accept to be paid back and award upward to $1,000 per employee, upwardly to a maximum of $10,000.

PPP loans can also be used for operational expenses, merely their master purpose is to cover 8 weeks of payroll. To qualify for forgiveness, you must spend at least 60% of the loan on payroll expenses. You lot can also apply a portion of the loan to cover mortgage, hire, or utility expenses. Every bit of 2021, the remaining 40% of the funds can additionally be used to cover necessary software expenses, holding harm from civic unrest, necessary supplier costs, and worker protection expenses like personal protective gear and barriers. The amount y'all tin can borrow depends on your payroll expenses.

You tin apply for and receive loans from both the EIDL and PPP programs every bit long every bit you meet the qualifications for both loans and utilize the loan gain differently. For example, yous tin employ the PPP for payroll and the EIDL to cover other operational expenses. Previously any money you received through an EIDL grant was deducted from the amount of your PPP loan that would be forgiven. That's no longer the case, making it possible to apply for both an EIDL grant and PPP loan without penalty.

How Economic Injury Disaster Loans Work

An EIDL loan can be used on payroll costs, employee benefits, fixed debts (such as mortgages, rents, or leases, accounts payable), and other bills. If you receive the forgivable grant, you need to spend information technology on those same expenses within eight weeks of receiving the grant — i.e., in the corporeality of time that it volition likely accept before the main loan comes through.

Likewise chosen "Working Capital Disaster Loans," EIDL funds are issued directly from the US Treasury, and you tin apply correct on the SBA's website.

How Much Can I Borrow?

You can borrow upwardly to $2 million, depending on the extent of your economical injury, as determined by the SBA. The SBA will determine how much you lot demand based largely on the data you lot supply about your business — including your business' gross revenue and cost of goods sold over the final 12 months.

Additionally, y'all can request an emergency EIDL grant that you lot exercise non have to repay. This grant cannot exceed $10,000 or $1,000 per employee. You lot will receive this much sooner than the bulk of the loan — as soon as a few days afterward successfully applying, according to the SBA. (In practice, however, businesses report much longer look times on their EIDL advances.)

What Is The Loan Term Length?

Loan term lengths can be as long as 30 years. Yous can defer your outset payment on the loan for upwards to a yr.

What Are The Rates & Fees?

Involvement rates for EIDL loans are 3.75% for businesses and 2.75% for nonprofits. No other rates or fees apply, and there is no prepayment penalty.

EIDL loans less than $25,000 exercise not require collateral, and loans less than $200,000 exercise not require a personal guarantee.

Is The Loan Forgivable?

The EIDL loan itself is non forgivable unless you afterward gyre it into a PPP loan, a portion of which may be forgivable. If yous receive the EIDL advance/grant, this amount is forgivable as long as you lot spend information technology on operating expenses as specified by the SBA.

Am I Qualified?

Well-nigh small businesses are eligible for an EIDL loan. The master requirement is that you lot have 500 or fewer employees. You besides need to have been in business concern since January 31, 2020. Hither are a few more things to know well-nigh EIDL eligibility:

• Businesses in certain industries may take more than 500 employees if they see the SBA's size standards for those industries
• Businesses cannot be engaged in illegal activities as divers by federal guidelines or lobbying
• Business owners cannot be more 60 days backside on child support
• Your business concern cannot exist a strip lodge or casino
• Business owners cannot be currently incarcerated, on parole or probation, subject to whatsoever electric current criminal charges or proceedings, pled guilty to a felony or been placed on parole or probation for a felony inside the past five years
• You lot can't be delinquent on whatsoever other SBA loans

Generally, you will also demand at to the lowest degree decent credit to be approved for an EIDL loan.

Notation that the deadline for applying for an EIDL loan for COVID-19 has been extended to Dec 31, 2021.

How Paycheck Protection Program Loans Piece of work

PPP loans tin can be used to cover payroll costs besides every bit virtually mortgage interest, rent, and utility costs over the 24-calendar week flow afterward the loan is made. It can also be used for paid sick leave and employee benefits (which fall nether the category of payroll costs). The loan is forgivable as long every bit you maintain your payroll. The main difference between a PPP loan and an EIDL is that you have to spend at least 60% of the PPP loan on payroll expenses.

Also, unlike EIDL loans, PPP loans are not issued straight from the U.s. Treasury. Instead, the funds are issued through an SBA-approved lender (depository financial institution or other financial institution), and yous utilize through this lender rather than through the SBA direct.

With the renewal of the PPP program and SBA guidance released on January 6, 2021, the PPP program at present allows for businesses to draw on PPP funds a 2nd time provided they meet a new, more than stringent set of guidelines. There are now slightly different rules governing businesses that are drawing upon PPP for the first time versus businesses that are making a 2d draw.

How Much Can I Borrow?

First Draw

The maximum amount you can borrow is equal to two.5x your monthly payroll or $10 meg, whichever is lower.

Second Draw

The maximum corporeality you can borrow is equal to 2.5x your monthly payroll or $ii meg, whichever is lower. Businesses in the accommodation or food service industries may borrow upwardly to 3.5x their monthly payroll or $ii million, whichever is lower.

What Is The Loan Term Length?

The term length is two years, and you can defer your first payment for six months.

What Are The Rates & Fees?

For any portion of the loan that is non forgiven, your involvement charge per unit will exist ane%. No collateral or personal guarantee is required.

Is The Loan Forgivable?

The loan is forgivable if you apply the loan proceeds as specified — for payroll, rent, and utilities, over a 24-week catamenia — and if you maintain your staff and payroll. If you lot take to reduce your staff or compensation, you lot will owe on the loan.

All the same, PPP loan forgiveness is non all-or-naught. Many businesses that are not able to maintain payroll (despite their best intentions) will have to repay a portion of their PPP loan but not the whole thing.

Hither's what the US Treasury Department PPP fact sail says about PPP loan forgiveness:

• Number Of Staff: Your loan forgiveness will be reduced if yous decrease your full-time employee headcount.
• Level Of Payroll: Your loan forgiveness will likewise exist reduced if you subtract salaries and wages past more than 25% for any employee that made less than $100,000 annualized in 2019.

The passage of the Paycheck Protection Flexibility Act offers boosted guidance:

• Re-Hiring: Yous take 24 weeks (not to extend beyond December 31, 2020) to restore your full-fourth dimension employment and bacon levels.

To request loan forgiveness, you demand to submit a request to the lender servicing the loan and include documents verifying your employee statuses and pay rates equally well as mortgage/rent and utility payments. The lender volition and so make a conclusion on forgiveness within 60 days.

Am I Qualified?

Hither'southward what yous need to qualify for a PPP loan.

Kickoff Draw:

• You accept fewer than 500 employees. Note that independent contractors and freelancers do noncount as employees. Yous cannot include independent contractors and freelancers in your employee count when applying for a PPP loan. Self-employed individuals have a separate PPP loan application process.
• You've been in business organization since Feb 15, 2022 or y'all're a seasonal business concern that was in operation for whatever 12-week catamenia between Feb 15, 2022 and Feb 15, 2020.
• Yous're able to demonstrate the economical bear upon of COVID-19.

Second Draw:

• Y'all accept fewer than 300 employees. Note that independent contractors and freelancers do notcount equally employees. You cannot include contained contractors and freelancers in your employee count when applying for a PPP loan. Self-employed individuals take a separate PPP loan awarding process.
• You've been in business organisation since February 15, 2022 or you're a seasonal business organisation that was in operation for any 12-calendar week menstruation between February xv, 2022 and February xv, 2020.
• Y'all have utilized all funds you received from your first draw.
• You are not a publicly-traded company.
• You must show a 25% or greater reduction in revenue comparing any quarter in 2022 to the same quarter in 2020.

The aforementioned EIDL restrictions regarding applicants with recent criminal histories and applicants belonging to certain industries too apply to PPP applicants.

In addition to the to a higher place, you can consult with your participating SBA lender to detect out that lender's specific requirements for PPP loans, every bit these requirements may vary somewhat from one lender to the adjacent. PayPal and Foursquare have also both recently announced they accept been approved to issue PPP loans, and so yous may be able to utilize through those companies' corresponding websites (yous may need to prepare a Square or PayPal account if you don't have one already).

Can I Utilise For Both?

The brusque answer is yes, you tin can apply for both loans, provided you encounter the eligibility requirements for both loans. And then should you? Only continue in listen the post-obit:

• At that place are different application processes and documentation requirements for each loan.
• EIDL loans are not forgivable, apart from the EIDL advance, unless you can successfully scroll information technology over into your PPP loan (and even if yous exercise that, it's possible that not all of the loan will exist forgiven).
• EIDL has a college involvement rate than PPP (3.75% vs. 1%).
• You cannot use an EIDL for the same purpose equally a PPP loan (payroll in the two months after receiving the loan). Still, y'all can use the EIDL for payroll once you've wearied the PPP after those two months accept passed.
• If your business receives both loans or refinances an EIDL into a PPP loan, the EIDL grant corporeality volition be subtracted from the amount forgiven in the PPP loan.

Taking all this into account, y'all should merely also utilise for the EIDL if you need information technology on superlative of the PPP, and you are OK with starting to repay the loan after a twelvemonth.

Which Is Best For My Financing Needs?

Read the following to determine which type of SBA loan is all-time for your business organisation's financing needs.

Apply For An EIDL Loan If…

• You need assistance paying your operating expenses (payroll, mortgage, hire, utilities) due to COVID-related business losses
• Yous understand y'all must repay the loan (aside from the grant portion)
• You're not certain if you'll exist able to maintain your business's payroll under current conditions (fifty-fifty if you receive the loan)
• You accept significant operating expenses apart from payroll

Use For A PPP Loan If…

• You need aid roofing your payroll over the next 24 weeks due to COVID-19-related business downturn
• With financial assistance to encompass eight weeks of payroll, you look to exist able to maintain most or all of your full-fourth dimension staff
• You lot empathise you can only spend up to forty% of the loan on not-payroll expenses
• You understand you volition have to repay some of the loan's amount if you don't maintain your payroll

Utilize For Both If…

• You lot need assistance paying BOTH payroll and other operating expenses (rent, utilities, mortgage, etc.) due to COVID-19-related business losses
• You lot understand you may accept to repay loan proceeds spent on non-payroll expenses (with interest)
• You understand the forgivable EIDL grant is subtracted from the forgivable portion of the PPP loan (i.e., you don't go the EIDL grant if you lot also get a PPP loan)

Where To Utilize For EIDL & PPP Loans

The EIDL and PPP program accept different applications and application processes. Below, you tin can find out where to employ for each loan.

For An EIDL Loan

You tin employ for an EIDL loan correct from the SBA's website. Observe the application here: EIDL Loan Application.

Notation: If y'all're calling the SBA's 1-800-659-2955 number to bank check on the status of your EIDL application, make certain to ask for the Tier 2 option, equally this pertains specifically to the COVID-19 program. If checking your EIDL status online, y'all need to notice the SBA Assistant at https://disasterloanassistance.sba.gov/due south

For A PPP Loan

Y'all tin apply for a PPP loan through any participating SBA lender. You cannot apply for a PPP loan directly through the SBA. If you have a business relationship with a bank or credit union, contact them to find out if they are participating in the program. You tin fill out PPP applications from the SBA and give them straight to your lender.

Through the SBA, here is the awarding for starting time-time borrowers: PPP Application First Fourth dimension Borrowers.

If you are applying for a 2nd draw, the application is hither: PPP Application 2nd Draw Borrower Awarding.

Here is our list of preferred SBA lenders, and here is the downloadable PPP application form, which you'll submit with the help of your lender.

More SBA Resources For Minor Businesses Afflicted By COVID-19

At Merchant Maverick, we are closely post-obit the news and regime resources available to aid pocket-size businesses. Every bit follows are some further resources we've put together regarding EIDL, PPP, and other SBA programs for pocket-size businesses affected by COVID-xix:

• How SBA Economic Injury Disaster Loan (EIDL) Emergency Advances Work & Where Your Small Business organisation Can Become One
• Round ii PPP Loans Explained: Rules, Requirements, & Where To Utilise
• When Volition My Paycheck Protection Programme Loan Be Funded?
• Your COVID-Affected Pocket-sized Concern Might Exist Eligible For SBA Loan Debt Relief Via The CARES Human activity
• The Best SBA Lenders For Small Businesses (& How To Cull The Right Lender For Your Needs)

In addition to the in a higher place, you can find fifty-fifty more than resources in our defended coronavirus (COVID-nineteen) business hub, which we update daily.

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Source: https://www.merchantmaverick.com/eidl-vs-ppp-loans/

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