Q. My business received a Paycheck Protection Program loan and an Economic Injury Disaster Loan Emergency Advance. Do we now have to pay back the advance?

A: The U.S. Small Business Administration's EIDL Emergency Advance program—now closed to new applications—provided up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties.

The SBA also continues to offer long-term, low interest loans designed to provide economic support and working capital to businesses to make up for temporary loss of revenue through its EIDL program.

EIDL advance recipients do not need to be approved for an EIDL loan to receive the advance and the advance does not need to be repaid.

However, if an EIDL advance recipient is approved for an EIDL loan, the amount of the advance will be deducted from the amount of the loan.

And, if an EIDL advance recipient received a PPP loan, the amount of their PPP loan forgiveness will be reduced by the amount of the advance. 

PPP loans can be fully forgiven if at least 60% of the funds are used for specified payroll costs, with up to 40% of the funds used on defined non-payroll expenses such as rent, mortgage payments, and utilities.  

Forgiveness is primarily based on employers maintaining or rehiring employees and maintaining salary levels. If full time employee headcount or wage or salary levels decrease, the amount of forgiveness can be reduced as well. 

EIDL loans may be used to pay debts, payroll, accounts payable or other bills that can’t be paid because of the disaster's impact, and that are not already covered by a PPP loan.

The interest rate is 3.75% for small businesses and 2.75% for non-profits. The first payment of the loan is deferred for one year and the maximum term of the loan is 30 years. 

Refinancing Requirements

EIDL loans cannot be refinanced with PPP loan funds if the borrower received the EIDL loan before January 31, 2020 or after April 3, 2020. 

In addition, an EIDL loan is not required to be refinanced with a PPP Loan when the borrower received funds from an EIDL loan from January 31, 2020 through April 3, 2020 and the borrower used the EIDL loan for purposes other than payroll costs. 

A PPP loan must be used to refinance the full amount of an 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. 

 For more information, contact CBIA's Brian Corvo (860.244.1169).