Apr 05, 2020

How Do SBA Coronavirus (COVID-19) Loans Work?

As the coronavirus (COVID-19) pandemic continues to spread, the federal government has allocated resources to support small businesses through economic hardship and hopefully restore some of the jobs lost (now at 9.6 million people according to the latest jobs reports) as a result of mass stay-at-home orders and business closures. 

Given how quickly the rollout has come—and how many changes have happened along the way—many small business owners have been left scratching their heads, saying, “Wait a second, how do these SBA coronavirus loans work, and will my business even qualify?” 

Great question. Let us answer it. 

What Are the SBA Coronavirus Loan Options?

There are 2 types of SBA loans that you need to know about: Paycheck Protection Program (PPP) Loans and Economic Injury and Disaster Loans (EIDL). PPP loans were created under the CARES Act for small business payroll support. Up to 100% of the loan principal is forgivable. 

EIDL loans existed under the SBA for previous disaster relief, and funding for the loans was increased under the CARES Act. These loans usually only apply to designated areas—the good and bad news for small business owners is that all US states, Washington DC, and US territories have been designated as disaster areas eligible for EIDLs. 

Why is “loan” included in the acronym for EIDL but not for PPP….loans? We can’t tell you why the powers-that-be made that choice, and we’d love to know, too. 

What Can You Use the SBA Coronavirus Loans For?

Each of the SBA coronavirus loans was devised for a specific disaster/”the pandemic we’re living through” purpose. EIDLs help small businesses that have suffered “substantial economic harm” endure or recover from a disaster. EIDLs can be used to pay for expenses that could not be met because the disaster, in this case the COVID-19 pandemic, occurred. 

PPP loans were designed to incentivize small businesses to keep employees and independent contractors on the payroll, so the allowed uses for PPP loans pertain largely to payroll costs. Funds used to pay eligible costs in the first 8 weeks of the loan (starting on the origination date) can be forgiven up to 100% of the loan principal. 

Who Qualifies for SBA Coronavirus Loans?

Another great question. The short answer is: small businesses with fewer than 500 employees can apply. For the longer, more specific answer, check out Will You Qualify for a COVID-19 Loan?

How Can You Apply for SBA Coronavirus Loans?

The SBA has broadened allowances for who can fund PPP loans in an effort to get as many small businesses financed as quickly as possible. That means that in addition to applying directly through the SBA, you can also apply through other approved lenders and fintech companies. Before all this went down, Lendio was already the largest lending marketplace in the US. Since the details of the PPP were announced, we’ve been working on overdrive to build an even broader coalition of PPP lenders. The combination of our tech and our robust network of respected lenders means that small business owners can apply for their PPP loans in the simplest, easiest way with lightning-fast funding. 

EIDLs can only be applied for through the SBA website. The application takes about 2 hours and 10 minutes to complete. Don’t forget to click the box on the 4th page that says, “I would like to be considered for a grant of up to $10,000” so that you’re considered for the EIDL Loan Advance. 

Wait, What’s the EIDL Loan Advance?

The EIDL Loan Advance, or the Emergency Economic Injury Grant (EEIG), is essentially free money from the government. While the SBA refers to it as a loan advance, it does not need to be repaid (hence why it’s also called a grant). We see that we’re in the land of confusing loan jargon and acronyms again, but trust us: this one’s worth it. 

Anyone can apply for the (up to) $10,000 advance, but time is of the essence. The SBA has only allocated a certain amount for these grants. When the money’s gone, it’s gone, so we highly suggest small business owners prioritize submitting their EIDL applications sooner rather than later! And don’t forget to click the box! (Yes, clicking a box is really all it takes. We were surprised, too!)

Yes, You Can Apply for Both

Borrowers can apply for both a PPP loan and an EIDL, but there’s a (very fair) rule: no double-dipping, i.e., you cannot request the funds for a duplicate use. So if you requested and received EIDLs to cover April rent and utilities, you couldn’t use your PPP loan for April rent and utilities. You would, however, be able to use the PPP funds for May rent and utilities.


While every effort is made to ensure the accuracy of information when a story is published, the coronavirus pandemic and Paycheck Protection Program (PPP) have caused details to change at a rapid pace. Additional guidance from the government may change or clarify certain aspects of the forgiveness process and could result in changes to the information contained in these pages. For the most up-to-date information, please visit the COVID-19 section of our website. For more information, you can call us at (855) 853-6346. Lendio is not responsible for and provides no warranty as to the accuracy of this content. Lendio does not provide legal, accounting or tax advice. The information and services Lendio provides should not be deemed a substitute for the advice of such professionals who can better address your specific concern and situation.

About the author

Mary Kate Miller
Mary Kate Miller
Mary Kate Miller is a writer based in Chicago, IL. She specializes in covering finance (personal and business), investing, and real estate. Her mission in life is to give readers the confidence and the knowledge needed to grow their wealth by making financial topics more accessible. When she's not writing about topics like business loans, you can find her playing armchair financial advisor to the Real Housewives.


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