EIDL Grant -vs- PPP Loan

The requirement to repay an EIDL grant (often called an EIDL Advance).

The EIDL grant is indeed that – a grant – of up to $10,000 for the small business that did not receive a PPP loan.

However, note that Congress instructed us (via The Cares Act) to require repayment of EIDL Grants if the same applicant receives a forgivable 7(a) loan (also known as a PPP loan).

To use an example, a small business with 5 employees would receive a $5,000 EIDL Grant. If they also received a $100,000 PPP loan, and earned 100% forgiveness on that loan, then:
$100,000 PPP
- $5,000 EIDL Advance
$95,000 total net amount forgiven

Bottom line, the small business receives a $95,000 ‘grant’ from the federal government instead of just a single $5,000 grant. The $5,000 balance in this examples will turn into a 1% loan for either 24 or 60 months (depending on when the PPP loan was received), giving the applicant ample time to repay, and at a very low interest rate.

For those of you that want to see the actual verbiage of The Cares Act, I have included it below. Section E, subsection 6 spells out:
If an applicant that receives an advance under this subsection transfers into, or is approved for, the loan program under section 7(a) of the Small Business Act (15 U.S.C. 636(a)), the advance amount shall be reduced from the loan forgiveness amount for a loan for payroll costs made under such section 7(a).

Thank you for all your support of small businesses, and for helping them achieve clarity around this issue. Contact me any time if I can help with this or any other issue related to small business

Tim Jeffcoat
District Director, Houston
US Small Business Administration