December 14, 2020

Caity Roach
Editor

Hot Topic Tuesday — ICBA Continues to Push for Removal of EIDL Advance Deduction

Independent Community Bankers of America (ICBA), in conjunction with 44 state banking associations, continues to push Congress to pass legislation that would effectively remove the $10,000 Economic Injury Disaster Loan (EIDL) Advance grant deduction from Paycheck Protection Program (PPP) loan forgiveness. 

Under the CARES Act, small business borrowers could apply for a low-interest disaster loan (3.75% or 2.75% for nonprofits) which included  $1,000 in federal grant money for each employee, up to $10,000. However, shortly after the program launched, an Interim Final Rule was published in the Federal Register which made it so that the EIDL Advance grant would be deducted from PPP forgiveness. Prior to the publication of this rule, small business applicants for EIDL Advances were repeatedly told that the grant did not have to be repaid.

In a November 11, 2020 letter addressed to Mitch McConnell, Nancy Pelosi, Charles E. Schumer, and Kevin McCarthy, ICBA notes, “[small businesses] were surprised and disturbed to learn that PPP forgiveness is reduced by the amount of an EIDL Advance.” This requirement essentially cancels the borrower’s PPP forgiveness altogether, forming an EIDL Advance debt trap.

In light of this unintended effect, both the House and the Senate have included stand-alone bipartisan bills that would remove the EIDL Advance deduction. Additionally, some broader pandemic relief packages have also featured this adjustment alongside additional funding for PPP. 

With Congress running out of time to pass a stimulus package by year-end, ICBA is now calling on small business lenders and their customers to reach out to their lawmakers about the EIDL Advance deduction and additional PPP reforms.

Sources:
ICBA
IFR: Business Loan Program Temporary Changes