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Paycheck Protection Program vs. Disaster Loan: Which One Is Right for My SMB?

Know the difference between the SBA Disaster Loan Assistance and Paycheck Protection Program, and what is right for your business

The Small Business Administration is offering 2 types of coronavirus relief loans, and it’s causing some confusion. This article breaks down the loans and helps determine which one is right for you.

The 2 types of loans are:

The SBA Disaster Loan Assistance

The SBA is offering loans under its Economic Injury Disaster Loan Program to qualified businesses impacted by COVID-19. The disaster loan application can be accessed on the SBA website.

The loan application asks for your gross revenue for the 12 months prior to the dates of the disaster (which is January 31, 2020) and the cost of goods sold for the 12 months prior to January 31, 2020.

You can also request up to $10,000 in advance.

At this time, there’s no loan forgiveness for an EIDL loan.

If you did receive an EIDL loan, you can apply for a Paycheck Protection Program loan (see more info below). Then, refinance the EIDL loan into a PPP loan so you could apply for loan forgiveness.

Paycheck Protection Program

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocates $349 billion for small business loans. Loans are available to small businesses impacted by COVID-19.

Loans can be up to 2.5x the borrower’s average monthly payroll costs incurred during the year prior to the loan origination date. The maximum loan amount is $10 million.

The PPP loan can be used for:

  • Payroll

  • Healthcare premiums

  • Insurance premiums

  • Mortgage or rent

  • Utilities

  • Other debt