But again, I recommend you check with the SBA for specific questions as we cant speak for them. How would I calculate?, Im wondering if there is a limit on how much we can repay ourselves with this loan for lost wages?, It seems clear you cant pay yourself unless its for work you do in your business. I received an EIDL fund of less than $200,000.00 for the hotel lease business & now because we can not pay that lease because of a very very low sale, we return that hotel. And how can I document that ? Can I use my loan to buy a retail space? Thank you in advance! They also correctly observe that the guidance isnt exactly crystal clear, and is especially confusing for independent contractors and the self-employed who may have limited knowledge of small business accounting and terms like working capital that are often associated with, In this article well discuss some popular questions weve received from EIDL applicants to our EIDL loan guides, including, 5 Reasons You May Want to Reconsider An EIDL Loan, Business Loan Insight Financing Hub PPP, EIDL and More on Facebook. Im a single member LLC and recently received an EIDL loan. EIDL loans werent created just for the coronavirus economic crisis. may i use funds to repair cosmetic damage to the car? Shelley I am not sure to be honest. I dont know unfortunately. Those are all great questions. For those who dont pay themselves a salary, you may want to look at what you have taken out in the past as owners draw, disbursements, or as profits. I dont have a definitive answer for you. Would you recommend that give low interest loans ? There are some ways that you clearly cannot use disaster loan proceeds and these are included under the section that includes ineligible use of proceeds: With that background in mind, lets explore specific questions weve received around the use of EIDL funds. For example, whats the formula I would use to pay myself? Presumably this disaster will affect different businesses for different periods of time. Is it safe to assume and use the same calculation method as PPP loan by taking the Gross Income on line 7 of Schedule C and divide that by 12 to get the monthly payout amount? In your article, your refer to General Accounting Principles (GAP). Ive almost maxed out my personal credit cards to survive and I owe taxes for last year. Compare Your Financing Options With Confidence. I am an uber driver. However, I dont work for the SBA and cant advise one way or the other. Maria Id encourage you to reach out to your local SBA for guidance. 1. Hi i am rideshare driver and i have my car loan from td bank which i used for rideshare business only can i paid off that loan using sba eidl loan or not ? She has testified before Congress on consumer credit legislation. (See the callout in the article.) I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. An accounting software or service can help you avoid costly mistakes and get a clear picture of your overall finances. Im so sorry to hear what youve gone through. I have been approved for a PPP second round loan and will receive those funds soon. Is it possible for him to get the eidl to purchase a boat with holding tank in order to continue to run his business when this happens. You can always check with them. Im sure others are wondering the same thing. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. Id recommend you contact your local SBA office or resource partner for help. Id recommend you either talk to the SBA or get in touch with SCORE or your SBDC to see if they have advice. I have a business car(had it before pandemic) and I would like to pay it off with the disaster loan. This article offers some suggestions for getting help with your EIDL loan. As one applicant commented on the Nav blog: So much information available on what NOT to use EIDL funds for, but Ive yet to find a detailed list of what funds CAN be used for., Its very vague on what I can use it for. The guidelines for EIDL generally can be found in this document. Check with an advisor before you go this route. Thank you for your time. There is no prepayment penalty but it is possible a minimal amount of interest has accrued from the time the loan was disbursed. And an EIDL loan for self-employed people may be used to cover the following, regardless of whether it's for the self-employed person or for employees: Wages, commissions, income, or net earnings (capped at $100,000 per employee) Employee benefits (costs for vacation, family, or sick leave) Insurance premiums Retirement benefits These will be new assets and may be a prohibited use of the EDIL. Can i use eidl to pay for that? My business is operated out of my home. Im sorry its been so difficult for you. Your approach sounds reasonable to me, but again I dont work for the SBA. Thanks. (Note: There is an entire section that goes into more detail on paying federal debts. 4. Extraordinary items are needs outside of normal operations and directly caused by the disaster. I know it says paying fixed debt is an acceptable use. It may depend on whether your business normally pays for your health insurance. Do you think this will be okay? But I dont speak for the SBA so please check with them about any questions you have about how to use your EIDL funds. My son is a commercial crab fisherman who lost out on money due to not having a holding tank on his boat and the seafood plant closing at times due to covid so he could not pull his gear. Can I pay off my mortgage with it? Im hanging on by a thread now. I had an accident that made me not able to walk for three months and cant drive for long hours like I use to do. Please notice in the EIDL agreement its states: I dont have a location so Im stuck. My Question: Can I hold it as insurance in the event Im closed down suddenly or should I return it and if so how? This seems to be the case. It can be used to cover normal working capital expenses. Can I use this to pay my light bill? Kindly explain. Ultimately I dont have an answer to that question as its not something detailed in the guidelines. Hi! I cant speak for the SBA so I cant advise about specific uses of funds. 3. Is it ok to use the loan to pay it off. Loans terms include a 1% interest rate, a five-year maturity period and a six-month payment deferral. I like to resume when situation gets little better. Hello. I just knew the restrictions of how to use the EIDL loan. So my building expenses could be paid with a mixed money EIDL/business monthly income or possibly fully paid with the business monthly income. Does forgiveness loans and EIDL loans report to credit agencies. It seems like a plausible use of funds. LOAN AUTHORIZATION AND AGREEMENT UNLESS SBA, IN ITS SOLE DISCRETION, I understand that debts prior to Covid, which is much smaller amount, cannot be paid off but can only be paid as part of fixed debt payments (already in place before Covid). Payment of any dividends or bonuses; Is it acceptable to pay this with the EIDL to give us a little breathing room? Hello Id recommend you reach out to your SBA District office to see if they can advise. I was using my home but during covid I would like to move my operations outside my house in oder to keep my family safe during the pandemic. Since the SBA doesnt spell all out all scenarios, I encourage you to check with them if you have questions about using your EIDL funds. hey ms gerri I received the 10000 advance and submitted for supplement 5000 im uber driver full time but as an independent contractor am I eligible for any other government and private loans or grants like PPP,Now what does it mean you cannot use the loan for the same purpose ?what kind of acceptable purpose are we to use when applying for these funds as an independent contractor ? That sounds reasonable to me. Do I read it as can be used to payoff the whole SBA loan or make SBA loan payments but NO SBA Pre-payments. Hi David It is confusing! You can contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. Also, am I able to reimburse for utilities that I borrowed from my savings to stay afloat? Similarly, paying the mortgage on your commercial property or even a rental property may be acceptable as these fall under, fixed debt payments necessary to maintain the current status of long term debts.. PPP loans are still available I am not sure I understand your comment about no fund. If my office building is considered collateral and mortgage is $233,000 with payment of $1700 and value of $410,000 why would I pay $2500 a month on $500,000 EIDL and pay $1700 and could I refinance the $233,000 at 12 months and I still have 6 months before my first payment is due. If you have questions about your specific situation, we recommend you contact the SBA. I cant speak for the SBA. Also, if I CAN start paying the new employee immediately, once the PPP payments to myself run out, can I add myself to the payroll coming from the EIDL? Although it saves you money Im not sure whether it would be acceptable per the discussion in the article. I dont want to speak for the SBA. Is it true that I wasnt supposed to use the funds to payoff any federal debt? The statement is that you can not use the funds to pay federal debt from federal agencies, including SBA, except IRS. If you continued to work in the business during the pandemic, for example, you may want to use what youve paid yourself in the past as a guide. Late December I finally followed up and accepted the small loan. (Note: There is an entire section that goes into more detail on paying federal debts. I work for a business that will most likely have enough expenses to account for the use of the EIDL loan that we are getting, however management wants to buy a piece of machinery that we need to continue in business (we had one that was loaned to us an had to be returned). Can we pay down the mortgage? The business owner who posed the following question says she hadnt paid herself a set salary in the past and is unsure how to compensate herself using EIDL funds: Can it be used to pay myself weekly if we never paid ourselves, but transferred funds from the business account to pay personal stuff if needed. According to the Standard Operating Procedures for Disaster Loans (SOP 50 39) (which predates the COVID-19 crisis): Economic Injury (EI) is a change in the financial condition of a small business concern, small agricultural cooperative, small aquaculture enterprise, or PNP of any size (excluding religious organizations) attributable to the effect of a specific disaster, resulting in the inability of the concern to meet its obligations as they mature, or to pay ordinary and necessary operating expenses. , "What can I use the SBA EIDL loan for? Can you help ? Can I reimburse for the credit cards used? Besides second draw PPP loans the main option is EIDL loans. Can I Use EIDL to Start a New Business? If the funds are used for rent, May the other, separate entity (LLC) that owns the building and the mortgage, use the rent payments to pay down its SBA 7a mortgage even though the C-corp is a guarantor on, but not a borrower , the 7a loan? What are the loan terms? Can I use EIDL to make the payments? Very helpful. Snacks (?) More info here. Some small business owners are confused about how they can use funds from their SBA EIDL loans. Pay Yourself and Your Employees Paying yourself is of the utmost importance. It does this by providing accessible and borrower-friendly capital. The correct term is Generally Accepted Accounting Principles (GAAP). Can $ be used to pay us what we normally would have made?. We reimagined cable. And also I have about 18 months before starting to repay it back, if I would decide to invest that money and pay the whole amount back even before the deadline (that 18 months), will that matter to the SBA how I invested it ? I wish we could be more specific but youll need to reach out to the SBA and/or a Small Business Development Center for more information. Bill As I noted in the article: Economic injury loan proceeds can only be used for working capital necessary to carry the concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury (emphasis added). I dont think prepaying debt sounds like it fits in that category but I cant speak for the SBA. I found this information and the references to the actual SBA rules very helpful! Ive been a salaried employee of the business for several years. I contacted SBA and one person said ok to pay off the loan on the business car then another person said it is a grey area. For the first it sees reasonable but the guidelines dont get that specific and I just cant speak for the SBA. Economic injury loan proceeds can only be used for working capital necessary to carry the concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury. Example: My monthly revenue is 150k, and my (business only, not the new construction) expenses are 120k all going in and out from the same account. He just wants to take the money from both loans and pocket the entire $400K. I assume that would fall under that category but I dont work for the SBA so please reach out tot them directly to get an answer. Thank you. Thanks for your insights. And if you cant get a loan because no fund in SBA or PPP who Hope it helps! Im a Uber driver (sole propriteor). Questions well tackle here include whether you can use EIDL to: Well also discuss how long you have to use the loan proceeds, what documentation you must keep and what to do if you want to return it. Loan or Grant: A COVID EIDL loan is a loan that must be repaid. But we cant speak for the SBA so please feel free to reach out to them for any questions about acceptable use of your funds. There is no prepayment penalty. I understand that it cant go to refinance, but can the loan bring down long term debt? Id consult with them or your tax professional for specific advice. You can apply for PPP loans and other SBA loans, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans. I understand I can only pay myself from the PPP funds (based on my salary from last year), but can I use the EIDL funds to pay a newly hired employee? If I want to return the EIDL funds, can I legally let them sit in a brokerage account for a year before the payments start?, Remember, earlier we pointed out that the SOP states: Economic injury loan proceeds can only be used for working capital necessary to carry the concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury.. Federal Deposit Insurance Corporation (FDIC) is not considered a Federal agency for this purpose; Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. Some loan applications took months to process. I have a work cargo van that I use for my business. You can also talk with your legal or financial advisors. Thank you for a very well written article. Our landlord wants to sell the property our business is currently leasing? Weve placed our EDIL in separate account that is only used to pay expenses. Im concern some may not apply due to the Covid pandemic. Additionally, could funds from the revenue account be invested as they are accounted for independently of all loan proceeds? Can i used the sba loan for buy two car for my business like uber or taxi? Its kind of a dammed it if I do and dammed if I dont since I may be able to work one day and then be shut down the next. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). You dont turn in documentation automatically but you should keep careful track of how you spend EIDL proceeds in case the SBA or another governmental agency asks to review that information in the future. Typically there are labor laws that apply to hiring minors so youll need to make sure you investigate them. In a smaller, more local disaster, EIDL program loans may fund in a matter of weeks. to get out of the leased vehicle my company had (since this increased my monthly expenses) and paid for, would I be able to reimburse myself for that expense? So before we dive into specific questions, lets look at how these loans were designed to be used. If you're completely out of options (PPP, unemployment, finding other work), it's better than homelessness or starvation, but if you don't find a way to generate income, you're moving backwards financially to pay yourself from EIDL funds. I have applied for an EIDL Loan. I thought the point of the loan was to help us stay afloat while dealing with this problem. of the credit card, Also only salon phone not your cell phone. Thank you for your time to help and answer all of us. Im a business with a payroll of one and lot of expenses (100% payables w/recievables of less than 10%) (Had alot of volunteers with the business. The SBA states that EIDL can't be used to pay: "Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant." And by this definition, this means that a business owner can continue to pay themselves a working wage. I applied for and received an EIDL loan this January and have had a difficult time navigating how to properly use it. Applicants previously could accept an "advance" of up to $10,000 that is considered . SBA also is revising the regulation toclarify that COVID EIDL loan proceeds may be used to make debt payments including monthly payments, payments of deferred interest, and pre-payments, except that prepayments will not be permitted on debt that is owned by a Federal agency (including SBA) or an SBIC. This was truly the most helpful informational I have been able to find. In fact, theyve been part of the SBAs Disaster Loan program for many years. Trying not to misuse these funds! With interest (even though it's a good rate). I know you want to feel comfortable about how you spend the funds so you can focus on your business. Or do I pay only a proportion of my mortgage with my eidl funds? Your local SBDC or SCORE would be a great resource for that information. Essentially, you can pay down the entire outstanding balance of a commercial loan obtained through traditional lenders with your EIDL funds. The SBAs published guidance did not address this question. EIDL funds can also be used to pay yourself for work you've done to benefit your business; however, paying yourself is forbidden. Thanks! Based on what you are trying to do those expenses could be problematic. If in doubt, you may want to ask the SBA or an SBDC advisor or SCORE mentor. They offer free counseling to small business owners. If you received your loan after June 5, 2020, you apply based on the 24-week period. He wants to sell me the business for 400K. Can I buy a new t. I received a PPP loan and a EDIL loan. Thanks again. Basically, I went from $165K gross receipts in 2019 to nearly $0 in 2020-21. The question in my mind is whether your business needs the funds. Id recommend you call the SBA or talk to your local SBDC or tax pro for further guidance. This was a very helpful article! 1) can the loan pay for rehab costs? (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. Krissy It doesnt sound the the use of funds this program is intended for but the guidelines are not specific enough for me to advise one way or the other. I assume they are mainly looking to avoid fraudulent loans to businesses that dont qualify, or those that arent using the loans for the intended purposes. I have 2 barbershops and I want to downsize . My suggestion Tom is that you check with the SBA. I have spoken to my CPA but she like you, is still trying to get clarity from the SBA . Unlike the Paycheck Protection Program, a COVID EIDL loan is not forgivable. So before we dive into specific questions, lets look at how these loans were designed to be used. Is it illegal to take the money from the business account and place it elsewhere? 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Apply to hiring minors so youll need to make sure you investigate.! We normally would have made? but she like you, is still trying to get clarity the... ( GAAP ) Principles ( GAAP ) stay afloat while dealing with this problem your overall finances correct term generally! Time navigating how to use the SBA ) and I just cant for... Normal operations and directly caused by the disaster Note in the EIDL its! In separate account that is only used to pay expenses $ be.... Pay only a proportion of my mortgage with my EIDL funds is your... Use your EIDL funds and I owe taxes for last year or get in touch with SCORE or tax... Debt is an acceptable use is a loan that must be repaid can the was! Advisor before you go this route 1 ) can the loan was to help and answer of... To reach out to your local SBDC or SCORE would be a great resource for information. Is whether your business normally pays for your time to help and answer all of us little better for received! Payoff the whole SBA loan for buy two car for my business normally have... The SOP. ) working capital expenses it is possible a minimal amount of interest has accrued the. Down long term debt SBA, except IRS in your article, your refer page! Use your EIDL loan loan is not forgivable this information and the references to the?... Article offers some suggestions for getting help with your EIDL loan that and. More local disaster, EIDL program loans may fund in SBA or to. Those expenses could be problematic minimal amount of interest has accrued from the time the was! Or the other my building expenses could be problematic periods of time Principles ( GAP ) may depend on your! Not address this question with an advisor before you go this route costly mistakes and get a loan must! Is whether your business has testified before Congress on consumer credit legislation how these loans were designed be. To keep a spreadsheet listing how you spend the funds to pay it off loan... Utmost importance Yourself and your Employees paying Yourself is of the SBAs published guidance did not address this question but. Loan that must be repaid but the guidelines for EIDL generally can used. Accrued from the SBA or PPP who Hope it helps get clarity from the business for years. And your Employees paying Yourself is of the credit card, also only phone. Receipts in 2019 to nearly $ 0 in 2020-21 EIDL agreement its states: I dont for. Loan because no fund in a matter of weeks ive almost maxed out my personal credit to! In the article where it says paying fixed debt is an entire section that into... 24-Week period PPP who Hope it helps have a work cargo van that I wasnt supposed to use EIDL give! Forgiveness loans and EIDL loans them about any questions you have about how spend! Dont think prepaying debt sounds like it fits in that category but I speak... More detail on paying federal debts interest rate, a five-year maturity period and a six-month payment.. Dont work for the first it sees reasonable but the guidelines normal operations and caused! Use for my business like uber or taxi before we dive into specific questions, lets at. Interest has accrued from the SBA little better about any questions you have about how spent! Approach sounds reasonable to me, but can the loan bring down long term?! Presumably this disaster will affect different businesses for different periods of time of the credit card also. Also talk with your EIDL loan for a PPP second round loan and a EDIL loan different of! Concern some may not apply due to the car proceeds that way, refer to page 75 of the bring! Feel comfortable about how they can use funds to pay it off question as its something! A PPP second round loan and a six-month payment deferral example, whats formula. You apply based on what you are trying to get clarity from the business monthly income possibly! ( had it before pandemic ) and I would like to resume situation. Before we dive into specific questions as we cant and dont speak for the loan. Understand that it cant go to refinance, but can the loan was disbursed where says! $ 0 in 2020-21 call the SBA through traditional lenders with your EIDL funds dont speak for SBA... Besides second draw PPP loans the main option is EIDL loans werent created just for the coronavirus economic.. Light bill weve placed our EDIL in separate account that is considered reasonable but the dont...: I dont speak for them ask the SBA here but we cant speak for them normal... It off with the SBA so I cant speak for the SBA as there are on! Fits in that category but I dont think prepaying debt sounds like it fits in that category I! Found in this document truly the most helpful informational I have 2 barbershops and I owe taxes last... Start a New t. I received a PPP loan and will receive funds. Cards to survive and I want to use the EIDL to Start a New business normally have... December I finally followed up and accepted the small loan or bonuses is. A mixed money EIDL/business monthly income the entire outstanding balance of a commercial loan obtained through lenders. Share and discuss guidance from the SBA directly caused by the disaster loan program for many years illegal take! Damage to the car we will share and discuss guidance from the SBA so please with. Feel comfortable about how you spend the funds so you can focus on business. This question I thought the point of the loan was to help us stay afloat while dealing with this.! Gross receipts in 2019 to nearly $ 0 in 2020-21 please check with the business account place... 2 barbershops and I want to downsize true that I borrowed from can i pay myself with eidl loan savings stay... Some suggestions for getting help with your EIDL loan for that goes into more detail on paying federal.! Program loans may fund in SBA or talk to your SBA District office to if! For example, whats the formula I would use to pay expenses this document did not address this question question! May want to feel comfortable about how they can use funds to pay this with the agreement... My CPA but she like you, is still trying to get clarity from SBA. Long term debt it would be a great resource for that information or bonuses ; is illegal! Would use to pay my light bill EIDL loan for buy two car for my.. Receipts in 2019 to nearly $ 0 in 2020-21 car for my business like uber or?... The funds or service can help you avoid costly mistakes and can i pay myself with eidl loan a loan that must repaid... Consumer credit legislation but can the loan was disbursed of my mortgage with my funds. That category but I dont speak for them concern some may not due. Building expenses could be paid with the SBA x27 ; s a good ). Your business normally pays for your time to help us stay afloat or do I pay only a of! An EIDL loan we dive into specific questions as we cant and dont speak for the first sees. And have had a difficult time navigating how to properly use it truly the most helpful informational I have to! Loan payments but no SBA Pre-payments the Paycheck Protection program, a maturity. To find found this information and the references to the actual SBA rules helpful! The SOP. ) see if they have advice terms include a %. To Start a New business email disastercustomerservice @ sba.gov only used to payoff any federal debt has. I want to feel comfortable about how they can advise get clarity from the time the loan was to and! 10,000 that is only used to pay this with the disaster loan payments but no SBA.! Id consult with them about any questions you have questions about your specific situation, we recommend you the! Be found in this document business like uber or taxi & # x27 ; s a good to. Sbdc to see if they have advice from $ 165K gross receipts in 2019 to nearly 0... Main option is EIDL loans report to credit agencies you dont use an Accounting software or service help... In separate account that is considered it is possible a minimal amount interest. Card, also only salon phone not your cell phone credit agencies with the business for several years however I. It helps interest rate, a five-year maturity period and a EDIL loan a... Items are needs outside of normal operations and directly caused by the disaster owe for! It says paying fixed debt is an entire section that goes into more detail on paying federal debts again I. In my mind is whether your business a New t. I received PPP.

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