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Economic Injury Disaster (EIDL) Loans VS Paycheck Protection Program (PPP) Loans: What’s The Difference?

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Shannon Vissers

Shannon Vissers

Shannon is a writer and editor based in San Diego, CA. Shannon attended San Diego State University, graduating in 2005 with a BA in English. She is the former editor-in-chief of SteelOrbis, an online trade publication. Shannon has also published articles for LIVESTRONG.COM, eHow, Life'd, and other websites. She has been with Merchant Maverick since 2015, writing about POS software, small business loans, and financing for women entrepreneurs.
Shannon Vissers
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20 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Bette

    My husband is getting a $10,000 EIDL loan due to Covid for his home based business which is a sole proprietorship. He is the only employee. It says in the paperwork that the payments begin after one year and the length of the loan is 30 years.
    Is this 10,000 forgivable since that is all he is getting?
    Also, if not, is there a penalty for paying it off sooner to avoid all the interest?

      Jessica Dinsmore

      Hi Bette,

      If specific criteria is met, the loan can be forgivable in part or in entirety. We have a post that explains in detail that you may find helpful.

        Nick I

        Hi. I received an EIDL loan without any grant (advance amount) on 07/13, just a straight loan, grants are no longer given out.
        I have now been also approved for a smaller PPP loan. My intent is to use the majority of the money on payroll.
        Since there’s no longer a forgivable amount from the EIDL, just the PPP. What are my best options here, to allocate the funds from both loans towards payroll?
        Should I use up the PPP first and then tap into the EIDL funds?

        There’re also these rules, from which I don’t fall under the refinancing category, due to the receive dates:
        An EIDL Loan May Not Be Refinanced with a PPP Loan When:
        • The PPP Borrower received the EIDL loan before January 31, 2020 or after April 3,
        2020.

        A PPP Loan Must Be Used to Refinance the Full Amount of the EIDL Loan When:
        • The PPP Borrower received funds from the EIDL loan from January 31, 2020 through
        April 3, 2020; and
        • The PPP Borrower used the EIDL loan funds to pay payroll costs.

          Jessica Dinsmore

          Hi Nick,

          You can definitely use the EIDL and the PPP at the same time. The only exception is you can’t use the EIDL and PPP for the same thing, at the same time. For example, if you’re using the PPP for payroll, you can’t use the EIDL for payroll during the same time period. While the SBA has ended the advance program, the loans can are still eligible for forgiveness.

            We've done in-depth research on each and confidently recommend them.

            Sudon

            I was de ied for the loan will i recieve the grants? If so how long does it take?

              Jessica Dinsmore

              Hi Sudon,

              Unfortunately, the SBA announced on 7/11/2020 that they have ended the Advance program. I’m sorry to tell you that. We do have a post on what to do if you were denied that might be helpful. Best wishes!

                donna

                i received two deposits. 1,000.00 noted PMT and the other 10,000.00 noted CT on may 27th. this was an EIDL loan. I’ve used the money to pay property taxes, replace a 25 year leaking roof, property insurance and pay for accounting services. all operational costs. i’m confused about the 10,000.00 as a grant. Is this forgivable or not? I’m understanding that anything 10,000.00 and under is grant because it’s being funded by the treasury. MY head is swirling. Number two the forgivable application i’ve seen is inclusive of the PPP which i did not apply for. How or can I apply or what do I NEED TO DO to be forgiven? I already put the money in a seperat account and have all receipts for how i used the funds

                  Jessica Dinsmore

                  Hi Donna,

                  The $1000 is likely the advance on your loan. That advance is a grant and does not need to be repaid. Your EIDL loan is the $10k and in order for this to be forgiven it would have to be used as specified in this post on how to get your EIDL loan forgiven. Take a look and. if you have more questions please ask.

                    D L Moilanen

                    Hi,
                    I am a sole proprietor and recently approved for both the EIDL and PPP loans. I have accepted the PPP loan, but not the EIDL since I would need both for payroll purposes. However, your article states: “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.” I have not seen this 2-month option listed anywhere else and was wondering if you could share where you actually found this information in the EIDL regulations? I would be able to accept the EIDL if this is actually true. Thank you

                      This comment refers to an earlier version of this post and may be outdated.

                      Jessica Dinsmore

                      Hi D L,

                      You can definitely use the EIDL and the PPP at the same time. The only exception is you can’t use the EIDL and PPP for the same thing, at the same time. For example, if you’re using the PPP for payroll, you can’t use the EIDL for payroll during the same time period. I hope that helps!

                        Latoya

                        How do I know which loan I have received?

                          This comment refers to an earlier version of this post and may be outdated.

                          Jessica Dinsmore

                          Hi Latoya,

                          The loan offer should say what kind of loan it is for. If you had a deposit appear in your account without any correspondence, that could very well be the EIDL grant/advance.

                            This comment refers to an earlier version of this post and may be outdated.

                            Jack Marbury

                            Hello,

                            I’m a sole proprietor and received a (small) PPP loan May 15 and a (larger) EIDL last week. If I choose the 24-week forgiveness option with PPP do I have to wait til that period ends before using EIDL funds? I can’t afford to not use the EIDL for another 4+ months if that is, in fact, the case.

                            Thanks for your help!

                              This comment refers to an earlier version of this post and may be outdated.

                              Jessica Dinsmore

                              Hi Jack,

                              You can definitely use the EIDL and the PPP at the same time. The only exception is you can’t use the EIDL and PPP for the same thing, at the same time. For example, if you’re using the PPP for payroll, you can’t use the EIDL for payroll during the same time period.

                                This comment refers to an earlier version of this post and may be outdated.

                                We've done in-depth testing of each and confidently recommend them.

                                heather

                                My husband is the sole owner and only “employee” of our trucking LLC. We normally take a monthly draw from the business to our personal account to pay our house/personal bills.
                                Because of Covid, flatbed trucking is dead in our area and he hasn’t worked since early March for our business. We applied for the EIDL back in early May but it was turned down because they were only doing agricultural companies then. Because we don’t have employees, we didn’t realize we could apply for the PPP until a couple weeks ago, so we did. The day that it was approved and signed to be funded, we got an email saying that our EIDL was approved and how much did we want to borrow. We only borrowed about half of what we technically could have and also got a $1000 advance with the EIDL.
                                My concern is how to use both or either properly. I read on another site that you can’t really use PPP for owner draws because it isn’t technically payroll, but we haven’t taken a personal draw from the business since April because there’s no income to the business. We thankfully don’t have many expenses, but do still have insurance, cell phone and internet expenses, and normally would have a $2500 draw/month to pay our personal/household bills. We have been using savings to pay these. Any guidance on where I could find info written for non-legalese speaking people? I did open a separate account and put the PPP and EIDL and Advance funds in it, and haven’t touched either yet till I figure this out! The PPP was funded/deposited on 6/17/2020 and the EIDL on 6/23/2020.
                                Thank you for any help or direction!!
                                Heather S.

                                  This comment refers to an earlier version of this post and may be outdated.

                                  Jessica Dinsmore

                                  Hi Heather!

                                  “If you’re a sole proprietor or independent contractor, self-employment wages, salaries, and commissions not exceeding $100,000 annually also qualify as payroll costs. These costs will need to be proven by submitting payroll documentation.” We detail acceptable documentation in this post on PPP Forgiveness Rules. I also think this post on PPP For Self-Employed would be really helpful.

                                  “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.”

                                  I hope that helps bring some clarity!

                                    This comment refers to an earlier version of this post and may be outdated.

                                    choukri khouili

                                    hello. I just got an EIDL loan , do I have to spend the whole amount on any thing related to my business or can I also use it on my personal issues that is not related to the business ? ,
                                    thank you

                                      This comment refers to an earlier version of this post and may be outdated.

                                      Jessica Dinsmore

                                      Hi Choukri,

                                      EIDL loan proceeds and advances can be used on payroll, paid leave, leases or mortgages, or other operational costs.

                                        This comment refers to an earlier version of this post and may be outdated.

                                        Christopher Kenul

                                        Hello! THANK YOU! I have been looking for this answer! Where can I find in a legal document where it states that you can use the EIDL for payroll once the PPP is forgiven? My situation is a little different. I currently have the EIDL, but have not yet recieved the PPP. I would like to use the EIDL for payroll right now, but did not want to hurt myself if I could not use both for payroll at different times.

                                        Chris

                                          This comment refers to an earlier version of this post and may be outdated.

                                          Jessica Dinsmore

                                          Hi Christopher,

                                          You can use the EIDL on payroll before getting the PPP, but you’ll need to use the PPP to refinance the EIDL. Any EIDL money spent on payroll can be forgiven under the PPP (as long as everything is properly documented). You can find the exact language in the Rules & Regulations on page 4.

                                          If you received an SBA EIDL loan from January 31, 2020 through April 3, 2020, you can apply for a PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.

                                            This comment refers to an earlier version of this post and may be outdated.

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