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Can you refinance an EIDL into a forgivable PPP loan? SBA says maybe not

COVID-19 Articles

image of face mask over dollar bills with text EIDL to PPPIf you are thinking about refinancing an Economic Injury Disaster Loan (EIDL) into a forgivable Payroll Protection Program (PPP) loan, think again.

It’s not that simple.

Recent guidance issued by the Small Business Administration (SBA) in mid-June could disqualify you from making the change.

SBA procedures

The SBA guidance, as written in a June 19 procedural notice, puts parameters and conditions on the process of refinancing an EIDL into a PPP loan:

  • Borrowers cannot use PPP loans to refinance EIDLs if they received the EIDL before Jan. 31, 2020, or after April 3, 2020.
  • EIDLs received between Jan. 31 and April 3 may, but are not required to be, refinanced with PPP loans — as long as the PPP borrower used EIDL funds for purposes other than payroll.
  • If EIDL funds received between Jan. 31 and April 3 went toward payroll, then any new PPP loan must be used to refinance the full EIDL amount. (EIDL advances, you do not have to repay, are not included in the EIDL amount qualifying for any refinancing.)

The EIDL-PPP intersection

The original Coronavirus Aid, Relief and Economic Security (CARES) Act, seemed to allow use of PPP loans to refinance EIDLs. While waiting for PPP to get off the ground, many businesspeople applied for EIDLs. At the time, they believed they would then be able to rework them into forgivable PPP loans.

However, EIDL stalled under the crush of applications, and applicants did not hear back about their status until April, May, and June – after the April 3 cutoff date cited in the new SBA guidance.

This means that the only people able to refinance EIDLs into forgivable PPP loans with no EIDL strings attached are those who received their EIDL in that narrow window between Jan. 31 and April 3 AND did not use EIDL funds for payroll.

You can use EIDL funds for fixed debts, payroll, accounts payable, and some bills that you could have covered had the pandemic not occurred.

Anyone pursuing a PPP loan who already has an EIDL should remember, too, that all PPP allowable costs are allowable EIDL costs, but both loans can’t cover the same expenditures. For example, if you are using EIDL funds for payroll, interest, rent, and utilities, you can’t double-dip and use PPP funds for the same purposes.

Likewise, if you received a PPP loan, you cannot use EIDL funds for the same purposes until you exhaust your PPP loan.

Making the most of your PPP loan

In an ever-shifting landscape, business owners need confident guidance. For consultation on the forgiveness aspects of PPP loans, contact the professionals of Boyer & Ritter. Our COVID-19 task force rigorously tracks and monitors this fluid situation and is highly capable of providing accurate, expert guidance on qualified costs, employee counts, and all other intricacies pertaining to PPP loan forgiveness.

Benjamin R. Bostic, CPA, is a director with Boyer & Ritter LLC. His primary responsibilities include PPP and EIDL consulting as well as servicing the accounting, tax and consulting needs of the construction industry and closely-held business clients. Contact the Boyer & Ritter COVID-19 Task Force at 717-761-7210 or

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