PPP vs EIDL Loans: What Are the Differences?

Did you know that there are more than 31 million small businesses in the United States? If you are a business owner and were hearing the terms PPP and EIDL during the pandemic but are not 100% sure of the differences, you are in the right place. We are here to share more about PPP vs EIDL loans.

Read on to learn the differences between the two.

What Is a PPP Loan?

PPP loans are also known as payment protection program loans. These loans were designed by the SBA (small business administration) to help small businesses keep their employees on payroll. First draw PPP loan amounts could be up to 2.5 times the average monthly payroll for the year before the application was submitted. 

Second draw PPP loans could be 2.5 times the monthly payroll of $2 million, whichever was less. If the business was in the food service or accommodations industry, then they could borrow up to 3.5 times their monthly payroll. 

Most PPP loans were forgiven as long as all workers stayed employed for a minimum of eight weeks and the funds from the loan were used for either utilities, payroll, mortgage interest, or rent. If part of the loan was not forgiven, then that portion was automatically deferred for 10 months, and then it becomes a 2-year loan with a 1% fixed interest rate. 

Along with PPP loans, businesses were allowed to take advantage of employee retention credits. You can learn more about this tax break here, https://erctoday.com/employee-retention-credits/.

PPP loans were issued through an SBA approved lender (several financial institutions and banks were approved by the SBA to lend out this money. 

EIDL Loans

Economic Injury Disaster Loans were meant to help businesses cover six months of their operational expenses. Eventually the money has to be paid back, but the first $10,000 is 100% forgivable. 

Businesses were allowed to borrow up to $2 million, depending on how much the pandemic affected the businesses finances. The loan terms for EIDL could be as long as 30 years, and the first payment could be deferred up to a year after taking out the loan. 

For nonprofits, the interest rates are 2.75% and for businesses the rate is 3.75%. There is no prepayment penalty if you decide to pay the loan off early, and there are no other fees or rates. 

Although the loan was not forgivable like the PPP loans, it could be rolled into a PPP loan where a portion of it can become forgivable. The main requirement to qualify for an EIDL loan was to have less than 500 employees. 

The deadline to apply for the EIDL loan was December 31, 2021, and the loans were issued directly from the United States treasury.

Feeling Like a PPP vs EIDL Loans Pro?

Now that we cleared up the ins and outs of PPP vs EIDL loans, you can make informed decisions if you took advantage of either one of these loans during the pandemic. 

If this blog post came in handy, please continue browsing our business section for our latest tips to help level up your own business. 


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