EIDL vs. PPP: What You Should Know

There are a number of options coming to the forefront for small businesses and nonprofits seeking relief. The CARES Act has come to fruition quickly, which we can be thankful for--but confusion remains. We’re doing our best to sort it out for you.

A particular area of confusion centers around the Paycheck Protection Program (PPP) versus the Economic Injury Disaster Loan (EIDL). Here’s a simple breakdown of both. And the most important point, you can apply for BOTH and combine them.

Paycheck Protection Program (PPP): This is a loan program through the CARES Act meant to incentivize small businesses and nonprofit organizations that keep employees on the payroll through June 30, 2020. The program provides 2.5 times the company’s average monthly payroll as a loan.  While the funds acquired from the PPP loan can be used for a variety of expenses, 75% must be allocated to direct payroll costs. The loan is forgivable, up to 100%, depending on certain Full-Time Employee Equivalent (FTE) factors. We have explored the details of the PPP here.

Economic Injury Disaster Loan (EIDL): For small businesses and nonprofits experiencing a temporary loss of revenue due to COVID-19 can apply for a loan through this program. It is an advance, up to $10,000, that does not have to be repaid. There is an application process for this loan, here, and funds will be made available expeditiously. Churches, schools, and nonprofits will want to select the last option under the eligibility and will need to ensure they have current 501 (c), (d), or (e) status.

As mentioned, both of these programs can be combined. Here’s an example straight from the Small Business Administration guidance. 

EXAMPLE: Some employees make more than $100,000, outstanding EIDL loan of $10,000

  • Annual payroll: $1,500,000 

  • Subtract compensation amounts in excess of an annual salary of $100,000: $1,200,000 

  • Average monthly qualifying payroll: $100,000 

  • Multiply by 2.5 = $250,000 

  • Add EIDL loan of $10,000 = $260,000 

  • Maximum loan amount is $260,000 

Both of these programs have an application process that begins on Friday, April 3, 2020.