EIDL & PPP Loan Options Explained by Small Business Development Center

Category: What's New

All of us at the San Diego & Imperial SBDC Network know this public health crisis is hitting you, the small business owner, very hard. Know we are here to help. Of course, we are here to help with any of the different programs available, we wanted to send this email regarding the two federal programs – the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Plan (PPP). The CARES Act (Federal Stimulus) that was signed into law on March 27 enhanced the EIDL program and created the PPP.

One of the main questions we are asked is can a business get both an EIDL and PPP. The answer is yes. However, they cannot be used for the same purpose. Meaning, if you use EIDL to pay rent, you can’t use PPP to pay rent. That said, SBDC recommends applying for both loans, then to work with your SBDC advisor following the loan offers to balance the use of funds between both programs to best ensure the survival of your business.

Our on-demand webinar also features these two programs, with detailed instructions on how to complete your EIDL application. You can sign up here and watch the 30-minute video https://sdsbdc.ecenterdirect.com/events/12966

Economic Injury Disaster Loan (EIDL)

This program has been available since the disaster was declared. Thousands of small businesses were able to request immediate assistance. At the SBDC we are already seeing some of the businesses get their approvals from the US Small Business Administration (SBA). The CARES Act simplified the program application and allowed small businesses to receive an advance up to $10,000. Here are some key things to remember about EIDL:

  • This loan is direct from the US Federal Government.
  • The application is found at https://covid19relief.sba.gov/#/
  • Any small business can apply, with very limited exclusions
  • Independent Contractors, free-lancers, gig workers, home-based businesses, and any other sole-proprietor can apply
  • Non-profits can apply
  • The loan is for working capital to pay your business operational expenses, not to expand your business. It can be used to pay an owner their draw or wage for their living expenses.
  • Only the $10,000 advance portion can be forgivable

Paycheck Protection Plan (PPP)

This new program was created by the CARES Act. It is to support small business owners and their employees during the Covid-19 crisis by providing loans, that can be forgiven, in support of payroll expenses, mortgage, or rent. This program will become available on April 3. Here are some things to remember about PPP:

  • Loans are from banks or other lenders. You should first reach out to your bank if they offer the program. If not, you can find a lender at this page: https://www.sba.gov/paycheckprotection/find
  • You are eligible if you are small business or a non-profit 501(c)(3) in operation prior to February 15, 2020 and paid employees or paid independent contractors under 1099.
  • You are also eligible for a PPP loan if you are an individual who operates under a sole proprietorship or as an independent contractor or eligible self-employed individual, you were in operation on February 15, 2020.
  • Loans amounts cannot exceed $10million
  • Loan amounts are based on 2.5 times your average monthly payroll. Payroll is fully loaded, included payroll taxes, insurance, group-health, and retirement. Payroll in excess of $100,000 per employee is excluded, but the pay up to $100,000 for that employee is included.
  • Forgiveness of the loan would be done on demonstrated payroll, rent, mortgage, or utility costs made by the small business between Feb 15, 2020 and June 30, 2020.
  • Here is the SBA website summarizing PPP https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

We hope this helps. We know there are many questions. We are here to help.

State of California Announces New Small Business Assistance

Governor Newsom announced new small business assistance. Here is the press release. https://www.gov.ca.gov/2020/04/02/governor-newsom-announces-new-help-for-small-businesses-workers-displaced-by-covid-19/

Of note is the ability to defer sales and use tax payments for up to $50,000.