EIDL Loans: An Alternative to PPP Loans and Stimulus

In the wake of the COVID-19 pandemic, government loans and grants are integral in helping small businesses stay afloat. Through the Small Business Administration (SBA) under the CARES (Coronavirus Aid, Relief and Economic Security) Act, $377 billion in emergency relief funds come to the aid of small businesses through Economic Injury Disaster Loan (EIDL) and PPP (Paycheck Protection Program) forgivable loans.

Businesses can still apply for an EIDL loan through the SBA’s website. In addition, when businesses use the PPP loan for retaining employees it becomes more of a grant than a loan, as that utilization is a qualifying expense and the loan can be forgiven.

The EIDL Loan Program Is Still Open and a Great Alternative to PPP Loans

Neil Bradley, EVP and chief policy officer of the U.S. Chamber of Commerce, offered guidance to small businesses who are interested in applying for an EIDL loan, which is a great alternative to PPP loans.

“The main difference between EIDL and PPP is EIDL operates like a normal loan — you [have] to pay it back,” said Bradley. “The [great benefit of the] PPP program … is that, while it was a loan, if you use the proceeds from the loan for certain qualifying expenses, namely, retaining your employees, you could have the loan forgiven.”

He noted that the EIDL program is still available, and you can apply through the SBA’s website.

The Process of Applying for PPP Loan Forgiveness

Many people who already got PPP loans are now applying for forgiveness. Bradley says a small business might find itself in one of three groups.

He defined the first group as “small businesses who used their loan proceeds for qualifying expenses; to pay employees salaries … If you're in that bucket, then you might want to just go ahead and file that paperwork with your lender to get that process started.”

For the second group, Bradley explained that business owners may believe they qualify for full loan forgiveness, but “there's a lot of paperwork here and the way my business is going right now, I don't have time to pull all that paperwork together.”

If that’s the case, Bradley recommended waiting before filing. He and his team have been working with Congress to get a simplified loan process for every small business that has a loan for up to $150,000.

“And there are some people who I would say are in the third bucket,” Bradley added. “They used some of their loan proceeds to pay for qualifying expenses, but they're looking at their loan saying ‘I'm still going to owe some of this back.’ … If you're in that third bucket, it might make the most sense to simply wait a few weeks, see what Congress does and then decide how to proceed.”