The PPP and the EIDL SBA loan stimulus programs were designed for the same purpose but they are very different. In this video PPP vs EIDL we discuss the 9 main differences between the SBA Covid-19 EIDL and the PPP loan programs.

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This video is intended for education purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc. is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience. Freedomtax Accounting and Multiservices Inc. or its members cannot be held liable for any use or misuse of this content.

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EIDL vs PPP - Paycheck Protection Program
The two biggest stimulus programs for small businesses are the SBA’s Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP). What are the differences between them? Is one better than the other?

In this article, we break down both options so you can decide which one is right for your business (that being said, most qualified businesses will be able to receive both).

What are the differences between the EIDL and the PPP?
Businesses affected by COVID can apply for loans through the EIDL and PPP programs, which were funded by the CARES Act. PPP loans can reach $10 million and are 100% forgivable if used for approved expenses. EIDL loans can reach $2 million and must be repaid in full.

The EIDL is meant to help businesses cover six months of operational expenses. You do have the pay the money back, eventually. Under the CARES Act, EIDL loans also include a $1,000 – $10,000 cash advance, which does not have to be repaid — even if you are ultimately rejected for the EIDL loan.

The good thing about the PPP program is that you can apply for ppp loan forgiveness. PPP loans can also be used for operational expenses, but their primary purpose is to cover eight weeks of payroll. To qualify for ppp forgiveness, you must spend at least 60% of the loan on payroll expenses. You can also use a portion of the loan to cover mortgage, rent, or utility expenses. The amount you can borrow depends on your payroll expenses.

You can apply for and receive loans from both the EIDL and PPP programs as long as you meet the qualifications for both loans and use the loan proceeds differently. For example, you can use the PPP for payroll and the EIDL to cover other operational expenses.

Can I Apply For Both?
The short answer is yes, you can apply for both loans, provided you meet the eligibility requirements for both loans. So should you? Just keep in mind the following:

There are different application processes and documentation requirements for each loan.
EIDL loans are not forgivable, apart from the EIDL advance, unless you can successfully roll it over into your PPP loan (and even if you do that, it’s possible that not all of the loan will be forgiven).
EIDL has a higher interest rate than PPP (3.75% vs. 1%).
You cannot use an EIDL for the same purpose as a PPP loan (payroll in the two months after receiving the loan). However, you can use the EIDL for payroll once you’ve exhausted the PPP after those two months have passed.
If your business receives both loans or refinances an EIDL into a PPP loan, the EIDL grant amount will be subtracted from the amount forgiven in the PPP loan.
Taking all this into account, you should only also apply for the EIDL if you need it on top of the PPP, and you are OK with starting to repay the loan after a year.

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