The Truth About SBA Loans: EIDL vs PPP

by Mar 30, 2020Blog0 comments

How would you like to have two months of free payroll, rent, utilities, and interest? 

The CARES Act was recently passed to help small business owners just like you.  This legislation contains the option to apply for one of two loans products backed by the Small Business Administration: either the Economic Injury Disaster Loan (EIDL) directly from the SBA, or a loan obtained through an approved lender (usually a bank) called the Paycheck Protection Program (PPP).

Each option has benefits and drawbacks, but the PPP has the potential to free up a large amount of working capital that will help your business operate while retaining your employees — something that is required if you want to enjoy the loan forgiveness offered by PPP. 

UPDATE: April 6th, 2020 

Some specifics of both loans (but especially the PPP) are changing quite dramatically by the hour, it seems. We will keep you 100% informed with the latest changes and which ones are the most impactful.

The interest rate has been changed again!

On PPP term and interest rate:

2 years at 1.00%

All this being said, these loans are pretty complicated to grasp quickly, especially if you are trying to move quickly to save your business. I’ve spent the last few days totally immersed in research so I could start helping clients with it as soon as possible, and information is scarce and confusing. But we’ve got a good handle on it at the Upside office.

It’s important to get a quick high-level overview of what each program offers, how to apply, how much you can get, what the interest rates are and how they vary, the amount of forgiveness available if you meet certain criteria, etc… so I’ve decided to lay it all out for you right here and in the form of an FAQ!

As always, leave a comment below or schedule some time with us for free!

Who provides the loan and how do I apply?


The Small Business Administration (SBA) directly.

Application Page

A lender approved by the SBA (usually a bank).

List of approved lenders coming soon!

How much can I get?

Maximum of $2 million

Maximum of $10 million

A $10,000 advance is available by request (distributed within 3 days). If you are denied an EIDL, you do not have to repay the advance!

How is loan size determined?

This is an area of uncertainty, as it is determined only by the SBA and depends on company size, the impact of the disaster that you demonstrate in the data you submit to them, etc.

2.5x your average monthly payroll* in the 12 months prior to the date of loan origination.

Seasonal businesses should use February 15th, 2019 – June 30th, 2019 and/or March 1st, 2019 – June 30th, 2019.

Can I ever refinance these loans?

No If you took out an EIDL between February 15th, 2020 and June 30, 2020 and it makes more sense to have a PPP loan, you can refinance your EIDL by adding your outstanding amount to the payroll* sum.

Does the amount my company spends on the cost of payroll, rent, and other things factor in?

This is likely determined by the impact of the disaster that you can demonstrate in the data you submit to the SBA

*Payroll, as determined by the SBA, includes employee salaries, commissions, tips, state and local taxes, payments to sole proprietors and contractors, and essential employee benefits like health insurance and retirement. 

Compensation for individual employees that exceed $100,000 annually, foreign employees, FICA and income tax withholdings are excluded from this amount.

What is the interest rate?

3.75% for businesses,
2.75% for non-profits

What is the loan term?

up to 30 years 2 years

What can the funds from the loan be used for?

Operating expenses and other costs that would have been paid if not for the disaster. Payroll* costs, group healthcare benefits, insurance premiums, mortgage interest, rent on properties leased before February 15th, 2020, utility payments, or other debt prior to the disaster.

How is the loan secured? Is there collateral?


The SBA will file a UCC lien against the business assets. 

In addition, loans greater than $200,000 will require a personal guarantee from 20% stakeholders, LLC members, and partners. 

No collateral or security required.

When is the first payment due?

One year after the date of loan origination, with interest. At least six months after the date of loan origination, with interest.

Is there loan forgiveness?



Determined by the amount spent by the borrower in the 8-weeks following the date of loan origination, and 75% must have been used on payroll* costs.

What happens if I cut employee payroll?


The amount of loan forgiveness your business is eligible for will
reduced if:


  • You do not continue to maintain the average number of Full Time Employees (or equivalent ) compared to either the period of 2/15/19 – 6/30/19 or 1/1/20 – 2/29/20, as chosen by the borrower as the best representation of their average roster, or
  • You reduce compensation for any employee making less than $100,000 annually by more than 25%

What happens if I re-hire people or restore cuts?

Nothing If you cut payroll or made layoffs in the period between February 15th, 2020 and 30 after the adoption of the CARES Act, you can avoid reduction in loan forgiveness if you reverse these actions by June 30, 2020!  

Do I have to file my 2019 Taxes to apply?

No This is at the discretion of the lender.

How long do applications take to process?

2-3 weeks for processing,
5 days for funding
Depends on the lender and their SBA approval conditions

Can I apply right now?

Applications are live!
Get started ASAP.

The SBA still needs to deliver their guidelines to lenders and determine their requirements. Then, the lenders themselves will develop their own processes.

We’d like to assume that lenders will be more than ready to take applications immediately when the SBA allows… so, maybe 2-3 weeks?

Wait a minute. Do I even qualify as a "small" business?


A small business is defined by the SBA as a business with less than 500 employees and $35 million in revenue.


However, employees of other businesses under common control must be counted as well.

Businesses and entities must have been in operation on February 15, 2020 and have 500 or fewer employees. There are some exceptions based on the industry:


  • Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.
  • Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72 (Accommodation and Food Services companies)
  • Affiliation rules are also waived for franchises with codes assigned by the SBA, as reflected on the SBA franchise registry and businesses that receive financial assistance from one or more small business investment companies (SBIC)


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