Normal Disaster Help vs. The New PPP Program

COVID-19 Relief Loans: EIDL vs. PPP – Which One Is Right for You?

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The COVID-19 pandemic has changed life as we know it—especially for small business owners. With 95% of Americans under some form of stay-at-home order (Business Insider), many small businesses have shut down or shifted to remote operations.

For small business owners, the concern over funding is very real. Some may not reopen at all, while others will struggle to stay afloat. Fortunately, the government has stepped in with two key relief loan options to help: EIDL and the Paycheck Protection Program (PPP).

Economic Injury Disaster Loan (EIDL)

The Small Business Administration (SBA) developed the EIDL soon after the national emergency was declared. EIDL loans provide small businesses with working capital to cover expenses during this economic disruption.

On March 27, 2020, President Trump signed the CARES Act, which included the creation of the Paycheck Protection Program (PPP)—a loan fund of up to $349 billion for small businesses.

Let’s break down the key differences between the two and which one may be better for your business.

EIDL vs. PPP: Quick Comparison

Yes, you can apply for both programs. In fact, 85% of small business owners planned to apply for both. If you receive an EIDL loan and later qualify for a PPP, you can refinance the EIDL using the PPP funds.

Need help choosing a loan? The Loan Brothers from Mares Mortgage can guide you through the process.

Who Is the Lender?

EIDL: The SBA is the lender. You apply directly through the SBA’s website.
PPP: You apply through any SBA-approved lender. This includes:
- Federally-insured banks or credit unions
- Farm Credit System institutions

When Can You Apply?

EIDL: You can apply at any time (as funding becomes available).
PPP: Initial application dates have passed, but you can still apply when new funds are allocated.

Who Can Apply?

EIDL eligibility includes:

Businesses with under 500 employees
Sole proprietors & independent contractors
Cooperatives, ESOPs, tribal businesses
Private non-profits
Agricultural cooperatives
Some businesses with over 500 employees that qualify as “small”

PPP eligibility includes:

All of the above, plus
Businesses operating by Feb 15, 2020
Multi-location businesses under NAICS code 72 (e.g., hotels, restaurants)

Understanding SBA Affiliation Rules

For EIDL: Affiliation rules determine what counts as a “small” business.

For PPP: Many affiliation rules have been waived, especially for:

Hotels and restaurants (NAICS 72)
Franchises with SBA-issued franchise codes
Recipients of small business investment company funding

Maximum Loan Amounts

EIDL: Up to $2 million, with an advance of $10,000 that does not need to be repaid.
PPP: Up to $10 million, calculated as 2.5x average monthly payroll.

Interest Rates

EIDL:
- 3.75% for businesses
- 2.75% for nonprofits
PPP:
- 1% on the unforgiven loan amount

Loan Terms

EIDL: Up to 30 years
PPP: 2 years (no prepayment penalties)

First Payment Due Date

EIDL: 12 months after the loan is originated
PPP: 6 months after origination

(Note: Both accrue interest during deferment.)

What Can the Loans Be Used For?

EIDL covers:

Financial obligations you could have met pre-COVID

PPP covers:

Payroll (salaries, tips, commissions, benefits)
Mortgage interest
Rent
Utilities
Pre-existing debt interest

Loan Forgiveness

EIDL: No forgiveness—repayment is required.
PPP: Eligible for forgiveness on payroll, rent, mortgage interest, and utilities used within 8 weeks of loan disbursement.

To avoid forgiveness reduction:

Don’t reduce your full-time employee count
Don’t cut salaries by more than 25%
Restore staff and salary levels by June 30, 2020

How to Request PPP Forgiveness

You must:

Submit a forgiveness request to your lender
Include documentation (e.g., payroll, lease, utility statements)
Certify the documents are accurate
Your lender will decide within 60 days

Which Loan Is Right for You?

EIDL requires collateral. The SBA will place a lien on business assets.
PPP does not require collateral.

At Mares Mortgage, we can help you figure out your best option and walk you through the application process.

No small business should close its doors permanently because of this crisis. We’re all in this together.

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