The recent EIDL Program Updates have led to several significant changes that could greatly benefit small businesses. These changes include the refunding of the EIDL “First Advance” Program, meaning eligible applicants who did not receive the first advance due to a lack of funds, or those who received less than $10,000, will now be able to access these funds. Additionally, under the new legislation, entities that received both an EIDL first advance and a PPP loan will no longer have the EIDL amount deducted from the amount of PPP debt forgiven. Also, EIDL first advances will no longer be considered taxable income. However, these changes require the SBA to establish a process for dealing with borrowers and lenders who have already processed their forgiveness applications, and those who have repaid their residual PPP balances.

Changes to the EIDL Program

Although a majority of small business and other interested parties have been focusing on the re-establishment of the PPP loan program, there were also several notable changes to the EIDL program that merit noting. These include:

Refunding of the EIDL “First Advance” Program

  • If an EIDL applicant did not receive the first advance because the program ran out of funds (mid -July), they will now be eligible for funding
  • If an EIDL applicant received less than $10,000 (based on the prior formula of $1,000 per employee, up to $10,000) they will now be eligible to receive the additional funds (the difference between $10,000 and the actual amount received)

Changes to PPP Loan Requirements

  • Under earlier versions of the PPP loan, if a borrower also received an EIDL first advance, then the amount of the first advance would be deducted from the amount of PPP forgiven, which would, therefore, result in many borrowers ending up with a small-balance PPP loan. The new legislation reversed this requirement so that entities that received both an EIDL first advance and a PPP loan will no longer have the EIDL amount deducted from the amount of PPP debt forgiven
  • EIDL first advances will no longer be considered taxable income

Impact on Small Businesses

These changes are good news for a lot of small businesses and other eligible entities. However, these changes will require the SBA to create a process by which borrowers and lenders have already processed their forgiveness applications. Also, some borrowers have also repaid their residual PPP balances, and these will need to be addressed as well. To date, fully 21% of small businesses have applied for partial forgiveness, primarily because they also received EIDL first advances. This could result in hundreds of thousands of small businesses will receive full PPP forgiveness, based on both loans already forgiven as well as those that will apply for loans under the new round of PPP funding. This information could be helpful to SBDC clients in the coming months as they sort thru existing PPP debts as well as they seek funding from the new round of PPP.

Question & Answer

What changes have been made to the EIDL Program?

The recent updates to the EIDL Program include the refunding of the EIDL “First Advance” Program, allowing eligible applicants who did not receive the first advance or received less than $10,000 to access these funds.

How have PPP loan requirements been impacted by the recent changes?

Entities that received both an EIDL first advance and a PPP loan will no longer have the EIDL amount deducted from the amount of PPP debt forgiven. Additionally, EIDL first advances will no longer be considered taxable income.

What is the impact of these changes on small businesses?

These changes are beneficial for small businesses, as many will now be eligible for additional funds and will not have the EIDL amount deducted from their PPP debt forgiveness. However, the SBA will need to establish a process for borrowers and lenders who have already processed forgiveness applications or repaid residual PPP balances.