EIDL Advances No Longer Reduce PPP Loan Forgiveness

February 22, 2021

On January 8, 2021, the U.S. Small Business Administration (SBA) issued a Procedural Notice (the Notice) – Repeal of Economic Injury Disaster Loan (EIDL) Advance Deduction Requirement for SBA Loan Forgiveness Remittances to Paycheck Protection Program (PPP) Lenders.

The Notice

Section 1110(e)(6) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) required the SBA to deduct the amount of any EIDL Advance received by a PPP borrower from the forgiveness payment to the PPP lender. That requirement was repealed with the enactment of the Consolidated Appropriations Act on December 27, 2020.

The Notice instructs PPP lenders on how to facilitate the repeal of the reduction from forgiveness. The SBA will no longer deduct EIDL Advances from forgiveness payments remitted to PPP lenders. This change will be applied to SBA forgiveness payments made on December 29, 2020, or later.

Reconciliation and What’s Next

Given the SBA has been remitting forgiveness funds since October 2, 2020, there are loans where the SBA remitted a forgiveness payment to a PPP lender that was reduced by an EIDL Advance. To address this, the SBA will automatically remit a reconciliation payment via ACH to the PPP lender for the previously deducted EIDL Advance amount plus interest through the remittance date.

The PPP lender is responsible for notifying the borrower of the reconciliation payment. The PPP lender is also responsible for re-amortizing the loan and notifying the borrower of the amount of the next payment due or advising the borrower that the loan has been paid in full, whichever is applicable. If the amount remitted by the SBA to the PPP lender exceeds the remaining principal balance of the PPP loan (because the borrower made a payment on the loan), the PPP lender must remit the excess amount to the borrower, including accrued interest paid by the borrower.

Let Aprio Help

Aprio has established a dedicated PPP team that is continuously monitoring new guidance from the SBA, as well as the Treasury, Congress and the IRS, to ensure we have the latest information when advising our clients.

For assistance navigating the PPP, contact Aprio’s dedicated PPP team for a consultation.

Disclaimer for services provided relative to SBA programs and the CARES Act

Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.

The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.

Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.

You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.

In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.

Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA programs.

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About the Author

Justin Elanjian

Justin Elanjian, CPA, is the Partner-in-Charge of Aprio’s Paycheck Protection Program (PPP) & Employee Retention Credit (ERC) Services. As a national PPP expert, prominent speaker and strategic business advisor, Justin helps both lenders and borrowers navigate the complexities of the PPP. He also helps his clients realize benefits from other stimulus package programs, such as the ERC, and is committed to strengthening his clients’ balance sheets and helping them achieve what’s next. Justin also leads a team of more than 50 professionals who share his passion for helping businesses maximize the federal COVID relief programs.