The difference between the Economic Injury Disaster Loans and Paycheck Protection Program. They are not the same thing!

 

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The difference between the Economic Injury Disaster Loans and Paycheck Protection Program. They are not the same thing!

There’s been a lot of confusion about the available SBA loans, and people confusing one kind for another. There are generally two types of new SBA “coronavirus” SBA loans.  Paycheck Protection Program- ‘7a’ or ‘PPP’ Loans (PPP) AND Economic Injury Disaster Assistance Loans (EIDL). You do not apply for the PPP loans on the SBA website, for example. The EIDL has NO loan forgiveness. To the best of my ability, I’ve made the guide below to help small business owners like me choose the right SBA loan for them.

||EIDL|PPP – 7a|
|:-|:-|:-|
|Originator|SBA (Direct)|Bank (that is SBA approved)|
|Maximum Loan Amount|$2,000,000 (the amount the SBA determines is a loss due to pandemic| Lesser of (2.5 x average monthly payroll of last 12 months) or $10,000,000 |
| Loan Forgiveness |NO| YES (if employees are retained) |
| Interest Rate | 3.75% | Not to exceed 4% |
| Term | 30 years | 10 years |
| Collateral | UCC lien | None |
| Guaranty | Yes, for loans greater than $200,000. |None|

Please let me know if anything here needs to be corrected. I didn’t become a small business owner because I am a perfectionist (I’m not). Like many of you, I just was unemployable!

The difference between the Economic Injury Disaster Loans and Paycheck Protection Program. They are not the same thing!

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7 Replies to “The difference between the Economic Injury Disaster Loans and Paycheck Protection Program. They are not the same thing!”

  1. So here’s where my confusion lies, I’m a sole proprietor, I don’t have payroll, I will NOT be applying for the PPP. If I apply for the EIDL, and the up to 10k is given to me within 3 business days, and they come back later saying ok you’re approved for X amount, but I don’t need that amount because the up to 10k amount was sufficient, what happens ? Do I pay back however much was fronted to me originally ? If so why is that original up to 10k front being called a grant?

  2. I’ve read different things. I’m not asking for a friend, I’m asking for me! Will I qualify for EiDL with a 600 credit score? Point blank, is there a cutoff Score?

  3. And shop for the best PPP interest rate. It’s up to 4% as set by the bank and know this little tidbit …. the law requires the Government to provide a lender with a process fee for servicing the loan. Sets lender compensation fees at five percent for loans of not more than $350,000; three percent for loans of more than $350,000 and less than $2,000,000; and one percent for loans of not less than $2,000,000.

  4. Why is there interest on PPP when the loan is forgiven later? Does that mean the principle is forgiven, but you have to pay the interest?

  5. Nice post to keep helping folks understand their options.
    Pls edit so it’s not misleading:

    – PPP loan forgiveness is for specific uses only and it’s only for the first 60 days after loan is dispersed. List them to be more accurate and add 60 days portion.
    – This is missing the (up to) $10k 3-day grant info for EIDL.

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