On Friday, the Small Business Association (SBA) released a notice to provide guidance on using Paycheck Protection Program (PPP) proceeds to refinance SBA Economic Injury Disaster Loans (EIDL).
Key highlights include:
- Any EIDL received before January 31, 2020, or after April 3, 2020, may not be refinanced with PPP proceeds.
- If PPP borrowers received EIDL funds between January 31, 2020, and April 3, 2020:
- Borrowers must refinance the full amount of the EIDL using PPP proceeds if the EIDL funds were used for payroll costs.
- Refinancing is not required if the EIDL was used for purposes other than payroll.
- An EIDL “advance” (also referred to as an EIDL “grant”) is not included in the amount to be refinanced. Per SBA, an EIDL advance does not need to be repaid.
- PPP lenders must remit funds directly to SBA if a PPP loan included an amount for EIDL refinance. If a PPP lender has already disbursed loan proceeds directly to the borrower, the lender is responsible for notifying the borrower of the amount that the borrower must remit to SBA.
To electronically remit EIDL refinance payments to SBA, borrowers and lenders may click here to complete SBA Form 1201 through the Treasury website. To ensure that payment is accurately applied, the “SBA Loan Number” on the form must be the EIDL number.
A printable version of SBA’s Notice can be found by clicking HERE.
A printable version of this article can be found by clicking HERE.
Mark L. Brasee
Neil P. Hassler
This article has been prepared for general information purposes and (1) does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. Always seek professional counsel prior to taking action.