PPP vs EIDL – Which CARES Act Program is Right for Me?

The CARES Act provides a wide range of support to struggling small businesses. But which program is right for you? Here’s a guide to help navigate your options.

What kind of need do you have?

• Paycheck Protection Program provides help covering payroll costs.
• Economic Injury Disaster Loan Emergency Advance is a $10,000 grant to help cover immediate expenses.
• Small Business Debt Relief provides a break from existing SBA loan payments.
• SBA Counseling & Training programs are available to provide help navigating these programs.
• Our business and leadership consulting friends at OneAccord are also offering free guidance to business owners looking at these programs! Reach out to us if you’d like a connection!

Paycheck Protection Program

This is a Small Business Administration (SBA) loan administered through banks intended to help small businesses continue their payroll expenses. The biggest feature here is the ability to have your loan forgiven for up to 8 weeks of payroll, as specified in the plan.

What businesses are eligible?

All businesses are potentially eligible. You’re likely eligible if you meet these requirements.

• You were in business on February 15, 2020.
• You have less than 500 employees.
• You operate a small business of any kind, including sole proprietorships and independent contractors.

How much can I borrow?

• 250% of your average monthly payroll up to a $10 million maximum from February 15, 2019 – June 30, 2019 (if you weren’t in business during those dates, use your average from January 1, 2020 – February 29, 2020).
• Eligible payroll expenses include salaries, wages, commissions, health insurance premiums, retirement benefits and state and local taxes for employee compensation. Eligible total compensation is capped at $100,000 per person.

What can I use the loan proceeds for?

• All eligible payroll costs described above
• Mortgage interest and debt obligations incurred before covered period, not including prepayment of principal
• Rent and lease payments
• Utilities

How is forgiveness calculated and what are the terms for any unforgiven balance?

• Proceeds used for payroll, mortgage, rent and utilities in the 8 weeks after you get the loan are eligible to be forgiven.
• 75% must be used for payroll-related costs.
• 25% can be used for non-payroll costs as specified above.
• Any remaining balance has a 2 year term and a 1% interest rate.

How do I apply and, if approved, how do I request forgiveness?

• Apply through any SBA approved lender – start with a bank you have an existing relationship with.
• Apply for loan forgiveness through your lender, also.
• You can view the SBA’s Paycheck Protection Program Borrower Application Form to see what’s required and get prepared.
• Full details available at SBA’s Paycheck Protection Program page.

Economic Injury Disaster Loan Emergency Advance

This program is very straightforward – a $10,000 loan advance to provide struggling businesses with cash. If approved, it does not need to be repaid. Here are the main points.

• All businesses with fewer than 500 employees are likely eligible.
• Apply through SBA’s online application – the application takes less than 10 minutes in most cases.
• If also applying for PPP, these funds should be used for non-payroll expenses.

Your financial, tax and legal team can help incorporate these options into your situation. As banks start to roll this out, we’ll see quite the bottleneck build, so eligible businesses should apply sooner than later to get into the queue.