Forgiveness of the PPP and the SBA Disaster Loan Assistance – What the Banks did not tell you.
Now that small businesses and individuals are applying for PPP forgiveness, it is becoming clear that PPP loans will probably not be forgiven if a borrower also received an SBA Economic Injury Disaster Loan (EIDL).
Therefore, if you received an EIDL from the SBA, then your PPP loan will not be forgiven and must be paid back.
While the SBA says that this policy was clearly communicated to the banks, the banks are now claiming that they had no clue if a PPP borrower had also received an EIDL $10,000 advance or loan. The CARES Act was enacted in March of 2020, but the SBA only clarified the restrictions in an interim rule in June and August of 2020.
However, certain banks did ask on the PPP borrowing application whether the borrower had also received an EIDL loan. These banks were able to alert their borrowers that the EIDL advances would be deducted from the PPP loan, but only after the SBA made those rules clear.
Clearly, this conflict between the PPP loan, the EIDL and the CARES Act is going to hit small businesses and individuals even harder, when they will have to begin paying back both loans in the near future.