7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP

7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP

7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP

On December 27, 2020 the President signed the stimulus bill which provides for new for Paycheck Protection Program loans, emergency EIDL grants and other small business relief. Read more about that legislation and apply for a PPP loan here.

When it comes to Economic Injury Disaster (EIDL) loans and grants, and Paycheck Protection Program (PPP) loans, business owners have questions. Lots of questions. At Nav, we’ve received thousands of them via our COVID-19 Resource Center blog articles, SBA CARES Act Insights Hub on Facebook and through our Lending Specialists who are helping small business owners explore financing options. 

Treasury and the SBA have been slow in providing guidance for some key questions. And some remain unanswered still. But business owners can’t wait as missteps— even if they stem from lack of guidance— could prove costly. 

Here are 7 pressing questions small business owners need answered ASAP: 

1. What Is the Status of EIDL Applications?

Congress recently authorized an additional $60 billion in funding for Economic Injury Disaster Loans (EIDL), with $10 billion allocated for the grant/advance and $50 billion for loans, to catch up with the backlog of applications.  

But business owners who have applied for Economic Injury Disaster Loans and need that funding to pay essential bills are in the dark about the status of their applications. 

Just spoke with a (SBA) representative by phone (1-800-659-2955) and was told that there is no possible way to check my current status of the EIDL Emergency Advance grant. I guess my only option is to wait and see what happens.”

As part of EIDL, the CARES Act mandated the SBA provide an advance of “not more than $10,000” three days after an EIDL application but that did not occur. Some business owners have begun to receive advances — often weeks after they applied—  but these advances come with no information on the status of their loan application. And since the advance has since been limited to $1000 per employee, many businesses are anxiously awaiting loans. 

While we’ve seen numerous updates from the SBA on PPP loans processed, the SBA doesn’t appear to have been as transparent about EIDLs. How deep is the backlog? How long is funding taking on average between application and the advance/grant, and then the loan? If the program is administered first-come, first-served could disclosing funding by application number help business owners see where they are in line? 

Some business owners are barely hanging on with no idea how long it will take to get essential funding. They deserve at least some level of transparency. 

Note the new stimulus bill passed December 27, 2020 created emergency EIDL grants that may be available to applicants who were previously turned down or did not get the full $10,000. Learn about these EIDL grants here.

2. How Do PPP and EIDL Work Together? 

Many business owners have been encouraged by the SBA and Small Business Development Centers (SBDCs) to apply for both EIDL and PPP if eligible. But what’s not clear is exactly how those programs work in concert with each other. 

“We received both PPP and an EIDL advance. The PPP must be used within 8 weeks to be forgivable. Can I use the PPP to cover payroll these next 8 weeks, and then use the EIDL advance after that until it runs out, understanding that I’ll need to repay the $10K “overlap” in the future?”

The CARES Act states: 

“Section 1102 (a)(2)(3) (Q) “DUPLICATION.—Nothing in this paragraph shall prohibit a recipient of an economic injury disaster loan made under subsection (b)(2) during the period beginning on January 31, 2020 and ending on the date on which covered loans are made available that is for a purpose other than paying payroll costs and other obligations described in subparagraph (F) from receiving assistance under this paragraph.”

What about other time periods? Could a business owner use EIDL funds to cover payroll before and after the 8 weeks of payroll after it gets the loan (the time period associated with forgiveness) as long as it doesn’t fall in that window? For businesses who need payroll help for longer than 8 weeks it’s a valid question. It’s particularly important for self-employed individuals who may not have significant working capital needs outside of payroll. 

3. Does an EIDL Grant Prevent an Employer from Taking The Payroll Tax Credit? 

The CARES Act creates an employee retention payroll tax credit. Employers whose operations were fully or partially suspended due to government orders, or who experienced a major decline in receipts may be eligible for a employee retention tax credit against Social Security wages for up to 50% of $10,000 in qualified wages (including health plan expenses) paid after March 12, 2020 and before January 1, 2021. 

“Also, can I do BOTH the $10,000 grant for EIDL and also the 50% Payroll Tax Credit? I know you can’t do both PPP and the tax credit, but not sure on doing both EIDL $10k grant and also 50% payroll tax credit. Because if I can do both of those, that’s $5k free money for the Payroll Tax Credit and $10k free money for the EIDL grant, and that would be $15k free money if I can do both.”

The IRS is clear that you can’t get PPP and take the employee retention tax credit. But what about the EIDL grant? It’s not clear. Presumably those funds could be used for non payroll tax purposes and therefore not jeopardize the ability to get both. But until Treasury, the SBA or the IRS comes out with guidance, who knows for sure? 

4. Why Are EIDL Grants Being Turned Down Due to Credit? 

The EIDL is a low-interest loan that business owners can use to help meet working capital needs while they recover from a disaster. These loans are ultimately funded by taxpayers, though, and the SBA requires acceptable credit to qualify. 

The CARES Act also created an EIDL advance (or “grant”) of “no more than $10,000” that does not have to be repaid. Section 1110 of the Act states: 

An applicant shall not be required to repay any amounts of an advance provided under this subsection, even if subsequently denied a loan.

Business owners—and we—were shocked when applicants were denied the grant due to their credit. If the grant doesn’t have to be repaid why would credit be a factor? 

“The EIDL loan was declined and I never received the $1,000 grant either. The rejection letter said that my credit score was too low to get approved for the loan. It’s not really bad credit but more like lack of credit I am guessing. I have no credit cards or loans. Car is paid cash and house is rented. I am liquid everything because I don’t like having debt.”

I have lost some business from the shutdown and expect I will probably lose more soon.

An explanation on why grants are being declined due to credit is needed. 

5. Are EIDL Grants Taxable? 

Update: The “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act” which was part of the stimulus bill passed December 27, 2020 clarifies that EIDL grants are not taxable, including those received in 2020.

The CARES Act clearly states that forgiven PPP loans don’t have to be included in gross income for tax purposes. In Section 1102 it states: “Taxability.—For purposes of the Internal Revenue Code of 1986, any amount which (but for this subsection) would be includible in gross income of the eligible recipient by reason of forgiveness described in subsection (b) shall be excluded from gross income.”

But what about the EIDL grants? This reader isn’t the only one who has asked us that question: 

Are EIDL GRANTS taxable? 

IRS guidance dating back to April 2013 would seem to indicate they are: 

Q:  If a taxpayer secures a low-interest disaster loan from the Small Business Administration what effect will it have on calculating a casualty loss?

A: A low-interest disaster loan from the Small Business Administration loan must be repaid and therefore does not reduce the casualty loss amount.  However, amounts of the loan, if any, which are cancelled or forgiven are included in gross income in the year of cancellation.  Additionally, insurance or other reimbursements received and not required to be repaid will reduce the casualty loss.

Is that the intent of Congress in this case? Taxpayers need to know before the quarterly tax payment they must calculate after they get the grant becomes due. 

6. How Do the Rehiring Provisions for PPP Work?

The main appeal of PPP is the ability to obtain forgiveness of the loan if used for the proper purposes. However, we’ve discussed the fact that forgiveness provisions are confusing and appear to be contradictory

“We had a forced closure, so laid off everyone, and most are now receiving unemployment insurance payments plus the federal supplement of $600. One of our employees was on leave at the time and can’t return because of family need, and now, travel restrictions. Must we re-hire her when we receive our loan (which is about to happen)? Our payroll calculations for the loan included her payroll information. Are we allowed NOT to count an employee? We want her back, but we don’t know when she can return and we don’t want to cut her off from unemployment insurance either. Re-hire and then, if necessary, lay off again? Another employee, a part-timer, prefers to retain her unemployment insurance payment until we re-open. Can we also allow that without risking loan forgiveness?”

The CARES Act appears to state that if, during the period of February 15, 2020 and April 26, 2020 (30 days after the CARES Act became law) the business reduces the number of full-time equivalent employees or salaries or wages as compared to February 15, 2020 and then eliminates the reduction by June 30, 2020 then there is an exemption to the reduction. But it’s unclear how that works in conjunction with the other requirements that seem to indicate forgiveness is based on how funds are spent the eight weeks after loan proceeds are disbursed. 

Plus all those other questions about employees who can’t or won’t come back to work. 

7. Can You Collect Unemployment Before or After PPP? 

Self employed individuals may be eligible for Pandemic Unemployment Assistance. They may also apply for PPP. But can they apply for both? And how do the two work together? 

“I am self-employed with an S Corp. I have 2 employees. I have been waiting for a PPP loan to get approved and it still hasn’t. Am I able to collect unemployment until my loan is granted? I have read that we are unable to file for both unemployment and a PPP loan. My fear is that I won’t see any money from PPP and lose out on potential unemployment benefits. I pay myself annually $96,000. We have been shut down since March 19 and I’m unable to collect any money from my business or government.”

The Interim Final Rule published in the Federal Register, Vol. 85, No. 76, Monday, April 20, 2020 states: 

In addition, you should be aware that participation in the PPP may affect your eligibility for state-administered unemployment compensation or unemployment assistance programs, including the programs authorized by Title II, Subtitle

A of the CARES Act, or CARES Act Employee Retention Credits.” 

But that’s the extent of this ominous warning. No specific guidance is given as to exactly how it may affect eligibility. What if a borrower decides to pursue the following strategy? Is that permitted? 

“My business only got $6,300 in funds. I’m the owner and the only employee on payroll. My business it’s been close for the last 2 months so I’m collecting unemployment. I owe rent and utilities which total close to the 6k. Can I use those funds to pay rent and utilities only ? I know I will have to pay it back but I just want to make sure I won’t have any problem if I don’t use the funds for payroll.”

The intention of these programs is to try to help business owners survive this crisis and resume their businesses successfully. It shouldn’t create more confusion and chaos. They shouldn’t have to hire lawyers to figure this out. (Many lawyers won’t advise on these questions without further guidance anyway.) 

If we really support small business owners as we say we do, then let’s get them answers to these and other important questions about COVID relief loans so they can get back to business. 

This article was originally written on May 1, 2020 and updated on January 20, 2021.

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57 responses to “7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP

  1. I’m confused. You posted probably the single most important question about using PPP and EIDL in conjunction and you don’t even address it other than to say that its an interesting question. Yeah it is! So what do you think about it? its probably the single most important question at this juncture in time for all of us. No one seems to be putting any literature out on this. do you have any feedback on this question?

    What about other time periods? Could a business owner use EIDL funds to cover payroll before and after the 8 weeks of payroll after it gets the loan (the time period associated with forgiveness) as long as it doesn’t fall in that window? For businesses who need payroll help for longer than 8 weeks it’s a valid question. It’s particularly important for self-employed individuals who may not have significant working capital needs outside of payroll.

    1. Jeremiah,

      All the guidance published to date about PPP loans is on the Treasury website here. Unfortunately there are questions that Treasury and SBA have not clearly answered. Since I don’t work for the SBA or Treasury, I’m not in a position to speculate and I certainly wouldn’t want to mislead anyone.

      As for using the funds before or after the payroll period, there is a little bit of leeway there if the payroll period doesn’t coincide directly with the eight week period. It’s spelled out in the application instructions here.

  2. I am receiving unemployment and received an EIDL loan. I am not using EIDL to pay myself. Can I still collect unemployment?

  3. I ama sole properitor. I applied for anything of help. I havevconstruction company. I was denied help. We havec9 jobs on hold over this virus. Nobody is helping. They want tax returns etc. 2019 not done done. I can send bank statements. State of Texas does not care.

  4. Number 2 in the article above is exactly my concern right now. I’m a Sole Proprietor, I got a PPP loan in May, then later received an EIDL loan. I’m now at the point where I’ve run through the PPP funds. Due to the uncertainty I’m nervous to start reimbursing my paychecks to myself each week with my EIDL Loan funds (held in a separate account). Is there any advice to be given about proceeding with using the funds? This is such a niche issue it’s hard to find anyone who knows anything about it… Why woudn’t the SBA let you use the funds in this way? Its really my only option for bridging the gap and getting my business into next year and beyond.

  5. I was approved for the loan and wasn’t approved for the grant I’m trying to figure out why wasn’t approved for the grant but you approve me for the loan to pay it back it makes no sense to me can you please help me understand it‍♀️

    1. Trina – My best guesses are:

      1. You didn’t check the box to get the grant.
      2. Your bank account information was wrong so it didn’t get deposited.
      3. You listed no employees.

      I’d recommend you call the SBA Disaster Assistance Hotline to see what you can find out. Will you let us know?

      1. I’ll chime in on your #3 above. I listed no employees but still received the grant for myself in the amount of $1000. It was unexpected because it was after applying that I read that the grants were given out in the amount of $1K per employee and I remembered I put 0 employees on the application (I was kicking myself until i noticed the deposit in my account). They must by default count 1 employee for SP’s. That’s just my experience.

  6. Hello


  7. I alittle confused about EDIL can I receive the Distater loan even if I purchased the company treated it like a new company and what is the time frame that the company is in business because I would like to apply for aEDIL.

    1. Lonnie – The time in business requirement has been waived. However the business must be in operation by the date of the declared disaster. For COVID-19-related claims that means before January 31, 2020. If the business was in operation by that date go ahead and apply. You can make a note in the comments to clarify the purchase.

  8. I recently received my eidl Loan I won’t need entire loan can I return a large portion of the loan to sba

  9. 1.Do I need to report to unemployment benefit about $1000 that I got from SBAD ?
    2. $1000 from SBAB is considered apart of my gross income ?

    1. If you use your EIDL grant (I assume that’s what you mean by SBAD) to pay yourself income then my understanding is you need to report it. Keep in mind those grants may be used for other expenses as described in this EIDL FAQs article. I’m not sure I follow your second question but perhaps you are asking if the grant is taxable? It’s our understanding it currently is but if you spend it on deductible business expenses then it’s somewhat of a wash. (That’s not official accounting terminology or advice – I am not an accountant!)

  10. I put my 20 k eidl loan in a brand new business account and pay vehicle, utility and insurance expense. I am a schedule c sole proprietor, can I deduct those expenses from my schedule c, and also if I use it for a payroll check to myself I assume it’s considered taxable income and needs to be claimed.. please reply !!

  11. Hi! My LLC received both the PPP and EIDL grant. We used the PPP to pay the three partners. We used the EIDL grant to pay a supplies bill. We have also been approved for a EIDL Loan for up to $65,000. I chose to only borrow $25,000 to go the unsecured route. My question is have we received any more guidance from the SBA on if I can use the EIDL loan to pay the partners outside of the PPP eight week period? In other words can I continue paying myself and the other partners after the PPP eight week period ends? We are in the hospitality industry and things may not improve for many months. Thank you!

  12. Can you pay your health insurance premium with EIDL? Can you pay taxes with EIDL? Is the loan taxable income?

    1. We now know it EIDL grants are not taxable. Loans are not taxable unless forgiven. The SBA says on its website under use of proceeds: Working capital and normal operating expenses Example: continuation of health care benefits, rent, utilities, fixed debt payments.

  13. Thanks for this article. Somebody just told me that they read that you could use the funds for the same purpose AS LONG AS it’s not the same period, however could not find it in writing now. Can anybody now confirm whether this is true or false? Thank you!

  14. Hi, I have applied for ppp and eidl loan , I received the ppp funds can I still receive the advance and the the eidl loan both ?

  15. I applied favor the loan and got a email saying I was denied due to my credit but was told I will still receive a grant even doe I was denied for the loan is this true ?

  16. I was denied the loan due to credit and have never received my $1000 advance. I understand my credit is poor, that’s one of the reasons I started my business, sole prop, to get myself back on my feet. And my business was going well until the beginning of March. I was under the impression that the advance would be immediate regardless of credit and regardless of whether I got the loan.

  17. Morning Gerri,

    We received PPP first (lets say hypothetically 100,000) and few weeks later, we got EIDL (10,000) as well. I am well aware of how to use them and my understanding is, 10,000 needs to be deducted from 100,000) bringing the PPP loan to 90,000. the new forgivable amount. I now have to do the 75/25 out of this amount and the remaining 10,000 from the PPP can either be returned or used as a loan at 1% for 2 years. The EIDL 10,000 gives us the freedom of using it for other designated non payroll expense, correct?

  18. Hello Mam, hope you are doing well.. I am confused and feels like can’t get any proper answer from anyone. I am a physical therapist and works at different hospital on W2. On the same note I have my own xyz LLC for home health and works from it. I applied for EIDL and luckily I received some money from it. My initial ppp from different banks got denied as I took K1 from my own company by filing 1065 last year and took w2 for this year first quarter. Fortunately today I received PPP via bluevine. During my recent ppp application there was a question “Has the Applicant received an SBA Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020? If yes, provide details on a separate sheet identified as addendum B.” I answered as “No” because I received EIDL in last week of April. As I was losing hope I also applied for ppp for myself from the 1099 I received from other ppp not my LLC on my 1040 of last year.

    My questions are
    1) did I answer wrong by saying no on EIDL question in ppp application.

    2) I used EIDL money to run my April payroll to myself Is that ok?

    3) as I received ppp today can I pay my May and June payroll from it ?

    4) should I pull that application of ppp as self employed based on 1099?

    5) how can I use this money to be able to get qualify for grant?

    Thank you mam in advance…. plz guide me

    1. I’ll do the best I can but there are still many unanswered questions and I can’t speak for Treasury or the SBA:

      1) did I answer wrong by saying no on EIDL question in ppp application.

      – If you did not receive an EIDL before April 3, 2020 then you answered truthfully

      2) I used EIDL money to run my April payroll to myself Is that ok?

      We don’t have clear guidance on this. We asked the same question in #2 of this article:
      7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP

      3) as I received ppp today can I pay my May and June payroll from it ?

      You can use the PPP for payroll in the 8 weeks after you get the loan. It’s not clear the basis on which you qualified so I can’t advise on how much will be forgiven.

      4) should I pull that application of ppp as self employed based on 1099?

      You may want to read the Treasury guidance on how to calculate PPP amounts by business type. It may help you understand the correct amount for which you are eligible.

      5) how can I use this money to be able to get qualify for grant?

      I’m sorry I don’t understand this question.

  19. I was stopped from getting unemployment because my employer got PPP loan.Now she refuse to pay me because she said she can’t pay me while sitting at home.Meanwhile she never offer me any job .I asked if she have a job for me now,she said no,because it’s an agency job.Clients have to call before she can have a job for us.She said she doesn’t have any job available for now.pls I need advice on what I need to do.Thanks

  20. Hi I received the loan offer but had not receive the grant yet ! Is that mean I won’t getting the 10,000 grant ?
    Thank you

  21. How does it work if I’m a bartender and we can’t open? Do I still get payroll from my job if they received the PPP loan?

  22. Hi, I am a LLC boutique 2 members – 2 employees . I applied for the EIDL disaster grant but never heard anything and fortunately was recently as of 2 weeks ago approved for self employed unemployment however 2k just appeared into my account today and it appears It’s from SBA. (The EIDL ) I’m assuming since I have never heard anything from them . There isn’t much information on receiving unemployment benefits & EIDL loan at the same time . However I-am concerned this will affect my unemployment benefits which is much more of a relief a week in pay overall for the month that’s helping me pay for my bills than this small 2k grant. I have business related bills, rent, and separate living expenses
    Need help and answers
    Thank you

  23. What are the stipulations upon ringing employees back in order to use the PPP money by the eight week period? Is there a cap on a raise or an amount that I can give someone in order to be able to use all the funds in that time period? I might be trying to do it in a two week. Since were still not back to my business. And I also allowed to just put a few people on for a week and a half to two weeks prior.

  24. hiya. been watching your YouTube videos. they are awesome and so helpful. I have a question though. how is the PPP loan supposed to work for employees. We are trying to figure out if my husband’s boss is screwing him over.
    he is a first responder and his boss cut everyone’s hours. he works 48 hours at a time but he cut all overtime, which is what we live off of. now he is making everyone do “on call time” at $3/hour. his income has taken a serious hit and his boss gave everyone a one time check of $400. was he supposed to do that every check or what? we can’t draw unemployment or at least I’m not sure we can. his boss has not restocked any of their PPE or supplies but has bought things for he and his wife. please help! I think we and all his employees are getting so screwed.

    1. Thanks for the kind words. The PPP is aimed at helping employers cover payroll and other than the general requirements to maintain payroll for forgiveness it doesn’t really address what happens at the individual employee level as far as I can tell. Unfortunately this question is more of a labor law/employment question than a PPP question. I wish I could help but I’d suggest he contact your state or the federal Department of Labor.

  25. Hello I receive the EIDL GRANTS $1,000 I’m a single member LLC do I have to pay this back and will I revive more money into my account from EIDL ?

  26. Hi
    I have applied for EIDL loan on March 29
    I had called several times each time i called i was told was with a loan agent I received an email on April 13 that i will be receiving an other email with Portal info
    Its now May 1 have not heard back So i called today and the 2 nd tier representative said my application was looked at on April 16 th and my Credit Report was locked which i was un aware of be cause on April 11 I unlocked it
    If i did not call I would never have known
    This is an awful system

    1. Thanks for sharing your experience. We’ve recommended borrowers unfreeze their credit reports until the SBA checks their credit reports but there are no doubt other borrowers like you who did not realize that would be an issue.

      1. Hello Gerri,
        I had the same issue. I applied on May 31, 2020. My credit report was locked and I had the wrong routing number on my application. The SBA attempted to pull my credit report on 4/19/2020 and I got a credit alert. I immediately unlocked the credit report and called the SBA on the next business day. The corrections was made for the bank account and I have not heard anything since. I call the SBA (about every other day), and Im always told that the application is under review but not assigned to anyone. The last representative told me it was assigned to someone but I was not allowed to know the name of the person (totally a lie). Many of my colleagues that applied after me have received their advance or loan, but my application is still “waiting for review”. Im just hoping the money is not gone before they pull my application.