I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. If you received your loan after June 5, 2020, you apply based on the 24-week period. If you really want to understand these loans, you have to look at the history of this program. My question is can I use my eidl funds to pay my monthly mortgage? Our accounts will show the deposit and a large amount going out for the machinery, but overall there will be enough expenses. Contact your elected officials in DC if you want to see this happen. Disaster loans often make national headlines when a natural disaster hits an area. Find local help here. Id recommend you either talk to the SBA or get in touch with SCORE or your SBDC to see if they have advice. Is these EIDIL loans forgivable during the pandemic? Can I use this money to pay my internet bill since i need my internet. 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 ? Our monthly rent went up. I have recently applied for and received a EIDG and EIDL for my small business. I would suggest you talk to the SBA. Thank you so much for this clearly written article that has been of help. You can apply for PPP loans and other SBA loans, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans. I am planning to pay myself by dividing my net income from Schedule C for 2019/2020 by 12. And since you cant relocate it could be an ever bigger issue. loan proceeds must be used only for eligible payroll costs and certain eligible nonpayroll costs as set forth in program . I need a new motor. I got the private loan in Sept 2020 and it has a term of 12 months. My take is that the Mastercard is just a payment method. Thanks Michael for the kind words. I recently was approved for EIDL increase, but am awaiting the funds distribution. Just a small cleaning business. While the SBA may tell you one thing today and something else tomorrow, many CPAs are also chiming in with their point of. Thank you for all your valuable info and keeping this up to date. You could share this article with your accountant for their opinion. To help differentiate the funds from the rest of your expenses, the SBA recommends keeping the EIDL money in a separate account. Instantly, compare your best financial options based on your unique business data. EIDL proceeds may not be used for: The PPP ties into the EIDL program because businesses and organizations that received EIDLs between January 31, 2020 and April 3, 2020 have the option to refinance their EIDL into a PPP loan if they used the EIDL to cover payroll costs. Hi Gerri! (Remember EIDL was not the popular and extensive program it has become when COVID hit so there isnt always guidance that addresses all scenarios.) Jeff According to SBA guidelines, refinancing long-term debt is not an acceptable use of EIDL funds. So my building expenses could be paid with a mixed money EIDL/business monthly income or possibly fully paid with the business monthly income. Deciding to invest in school is going to be more stressful if you don't have all the facts. Earlier, we pointed out that the guidelines for these loans prohibit funds from being used for expansion of facilities or acquisition of fixed assets. Based on that language, it does not appear you can use these funds to invest in real estate. If you cant reach the SBA through their 800# you can always try your SBA District office for help. Thanks for your article and your advice. Sadly, I never intended to misuse of funds. Id recommend you check with your local SCORE or SBDC office they are helping small business owners for free. I have a 8% APR on the auto loan that I use for Uber driving. Heard it can be used as a forgivable loan? Check with an advisor before you go this route. Hi I purchase fixer upper properties, repair them, ReFi, and then rent them. Extraordinary items can include: (1) Temporary rent or storage fees, additional advertising costs, etc. The EIDL guidelines arent specific enough for me to offer advice on individual situations. I detailed those resources in this 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)., Many small business owners arent familiar with the term working capital, though, and as a result they find that description confusing. Right now, our business is renting 2 units. In this case am I correct in thinking it could be used to pay IRS business debt? Whats Best Practice for Tracking the Use of My EIDL Funds? Hi. (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. 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 ? Thanks again. Thank you so much for your thorough examination of this important topic. Good news! I know it says paying fixed debt is an acceptable use. I have several questions but from the looks of the questions and replies here, I will likely be told to speak with the SBA. These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. Started a business back in 2019 covid-19 hit and it failed in july2020. 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. Im sorry I am not following your question. Moe SBA changed some of its allowable uses of EIDL funds over time. In addition, the SBA recently allowed EIDL funds to be used to refinance certain types of debt. She since has left the marriage and stated that she is the signatory of that loan and could not trust me to pay back the installments, Im more concerned about the legality of the moving of the funds for her sake. Although the EIDL loan can't be used to refinance debt or repay federal debt, there's an exception for tax debt. I dot see why that would be an issue but I dont work for the SBA so feel free to check with them or one of their resource partners if you have questions. The only long term debt with the office is the SBA loan and all other debt is operating expenses and for some reason if I needed to pay back the SBA loan I would just sell the office building because in a few years it will be worth $500,000 I would like to hire an employee that could bring me more business. Is it acceptable to pay this with the EIDL to give us a little breathing room? Of course youll want to track that. 1. It is in my name because my business did not have credit when I financed it. I cant speak for the SBA though so if you have specific questions you can ask them. They dont answer every question in nitty gritty detail. This was truly the most helpful informational I have been able to find. 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. Thank you in advance! 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. I gotten in my eidil targeted advance loan of the 9K Thank you so much for your insight! Since thats a combination of personal and business expenses, wed recommend getting professional advice before using EIDL that way. Hello I was wondering if my companys normal business is fix and flip real estate properties , mostly single-family , is that considered proper use of the EIDL funds.. Jeff Id suggest you talk with the SBA or your tax professional. Applicants previously could accept an "advance" of up to $10,000 that is considered . 1. I woukd like to use the loan to continue with a establish a safe place to continue operating my family childcare in my home. For example, whats the formula I would use to pay myself? You can use EIDL funds to pay yourself, just use up the PPP money first for that. Can I use EIDL to buy a vehicle for driving Uber because it is my only source of income for the last 3 years?. 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 ? Would this also apply to a private live/work condo mortgage? they asked. Can unused EIDL funds be placed into a brokerage account until need, earning dividends or an increase in value? Or do I pay only a proportion of my mortgage with my eidl funds? Michael Ive tried to share guidance based on the Standard Operating Procedures (SOP) for Disaster Loans which you can read here. Does forgiveness loans and EIDL loans report to credit agencies. Thank you for a very well written article. The business must repay them. Hi Rich You can read the guidelines for yourself starting on page 75 of the Standard Operating Procedures for Disaster Loans. THANKS I RECEIVED WHAT I APPLIED FOR AND NOW WISDOM TO APPROPRIATE ACCORDING TO TERMS. Try it. My first question: Can I use this money to buy parts on online and resell them on ebay? If it turns out you dont need all the money you received you can return it. & The COVID-19 economic crisis is an ongoing crisis and we dont know when it will end. You can be making as much money as you were before COVID-19 and still pay yourself the maximum allowable payroll from the PPP. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. I could use some of it now but I really prefer to wait until its my ablsolute last resort. I am a construction contractor, and also have my business monthly expenses paid with EIDL money and would use my income as for those materials expenses. Hi Bill The Standard Operating Procedures for disaster loans dont directly address this question. Can I transfer this loan to the new owner. Can EDIL loan be used to make repairs and pay off the mortgage? Thank you for this very informational article. The fact that you are an independent contractor does not change how you can use EIDL funds. This article details options for getting help with EIDL loans. I dont know unfortunately. He also lost gear due to this. Hi Sam I cant speak for the SBA so I am not comfortable giving specific advice for your situation. If your car payments are normal business expenses it would seem they would fall under the definition of working capital expenses. Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. You can also get free assistance by contacting the SBA Disaster hotline, your regional SBA office, your Small Business Development Center (SBDC) and/or SCORE. In this article well discuss some popular questions weve received from EIDL applicants to our EIDL loan guides, including Frequently Asked Questions about EIDLs and 5 Reasons You May Want to Reconsider An EIDL Loan, as well as in the Facebook group, Business Loan Insight Financing Hub PPP, EIDL and More on Facebook, where these loans have been a popular topic of discussion. Essentially, you can pay down the entire outstanding balance of a commercial loan obtained through traditional lenders with your EIDL funds. Your email address will not be published. Thank you. Perri I dont want to speak for the SBA so I recommend you talk to them to find out whether this would be an acceptable use of funds. I have not seen this question addressed in SBA or Treasury guidance unfortunately. (All of these must be related to work youre doing for the business.) In other words, lets say your average weekly profit from 2019 was $2,000. I now know though I was approved for a PPP loan that was utilized 100% to payroll costs, I may use the EIDL for payroll as well. Can I pay myself with SBA EIDL loan? I tried to address that question in point #4 in this article. note EIDL on those expenditures and keep a file or attach receipts. He has an SBA loan for 150K payable in 10 years and just got another one for recently for 250K payable in 30 years. It is used for my business. Unfortunately PPP is now closed. I dont know who you are trying to reach Darlene for help but if you havent done so already, I suggest you find help through your local Small Business Development Center or SCORE. First, buying a home clearly falls outside the intended uses of EIDL. I applied for an EDIL loan and was approved. (Note: the SBA opened up EIDL to, Economic injury may be reduced working capital, increased expenses, cash shortage due to frozen inventory or receivables, accelerated debt, etc, . I have applied for an EIDL Loan. If you're using an 8-week covered period, the cap is $15,385. Just a small cleaning business. 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. I also applied for and already received funds from an EIDL earlier this month. Hi, Unlike the Paycheck Protection Program, a COVID EIDL loan is not forgivable. You are very knowledgeable and very fortunate to have found you. Luiz We are not the SBA so we cant tell you specifically what you can and cannot do with those funds. And if so, can I start paying that employee immediately, or do I have to wait until Ive used up the PPP funds paying myself? Also, if I purchased a used vehicle with my personal acct. This helps. Can I payoff my car loan at once instead of paying monthly payments to save on high interest? Im thinking I should open up a new account just to manage the eidil funds. Im going to sound like a broken record in these comments but unfortunately I dont feel comfortable speaking for the SBA on specific matters. 3) we have a roof that needs to be replaced now on on of our older properties. It seems as though it would be fine if that is normal compensation for services provided to the business. Because of Covid and other business expenses, the entity requesting EIDL funds (C-corp) is behind on rent payments. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. 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. Great article! 2. I spoke with SBA and their advice was to contact a lawyer because they cant give me legal advice and she put a lot of emphasis on no relocating no upgrading. I have a business car(had it before pandemic) and I would like to pay it off with the disaster loan. Im currently not driving because of the pandemic. Your accountant may be able to help. Can you use the PPP to pay salary for the covered period, and the EIDL to pay salary AFTER that period? Finally, compensation in general is limited to an annualized rate of $100,000, or $46,154 for the 24-week period. In addition, many SBA resource partners such as SBDCs and SCORE are providing assistance with navigating these programs. Not a non-profit) You can always check with them. If you have questions about using your loan proceeds, we recommend you ask the SBA. (Keep in mind that with EIDL, the borrower doesnt ask for a specific loan amount; instead the SBA will calculate it based on its formulas for determining economic injury.) Ill note that many sole proprietors are paying themselves (usual compensation) with EIDL funds so it may make more sense to just pay that out of your personal funds. If want to buy a house can I apply for a loan to buy a house? There are a lot of these loans out there and it seems it will be difficult to audit all of them by the end of this year but I dont know what the process or procedures are for reviewing them. Id recommend you talk to the SBA, your SBDC or a legal or tax professional familiar with this program. Hi Gerri, thanks for such great information. This article offers some suggestions for getting help with your EIDL loan. Can I use it to switch business industries and start new business?. Can I Put My EIDL Loan In A Savings Account? Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. But keep in mind the purposes of this loan. 2) Ive been using the proceed to pay my monthly car loan and phone bill so far that I use for my business. Two examples, we have created a new brand and we plan to separate the IP into a new LLC and create a separate marketing company which will lease the IP and feed sales leads to our parent company. Start By Doing the Research. John I would recommend you check with SBA before you use EIDL to pay off your other SBA loan. I have an EIDL question: Do you think this will be okay? Can I Use EIDL to Start a New Business? My business was impacted mildly and have resumed 80%.. i used my PPP for all payroll Can i continue to use my EDIL for payroll, even if i am collecting income Also i have a 50,000 line of credit can i pay this off. How Much Can I Pay Myself and Qualify for Forgiveness? If we use the eidl funds to pay ourselves can we then pay for a new used vehicle if we drive for Uber or Lyft? A February 2021 press release from the SBA states. If your PPP loan is forgiven its doubtful it will report. Tesssa We cant speak for the SBA so we recommend you contact the SBA or an SBA resource partner if you have questions about your specific situation. After all, t he SOP 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." Tell me what I need to do. These loans offer low, fixed rates and repayment terms up to 30 years. Check with the SBA. And yes I would encourage you to open a business bank account to manage and track these funds. Its confusing out here! Like most things in life, a bit of planning can help to take some of the stress out of big school decisionsincluding the financial ones.**. Known as a financing and credit expert, Gerri Detweiler has been interviewed in more than 4000 news stories, and answered over 10,000 credit and lending questions online. I am finally able to rent court time again to give lessons but it now appears they may close again any day due to the recent surge in new cases/hospitalizations in my county. The following examples come from the section of the SOP (page 186-187, abbreviated here) that relates to calculating economic injury: To-date needs are normal obligations already incurred (usually reflected as liabilities on the most recent available post-disaster balance sheet), which the business is presently unable to pay as a result of the disaster. I used this loan only for the business, not personal. You may be able to get help for free from SBA resource partners. What are the loan terms? If you take draws to pay yourself, pay yourself from the EIDL funds draw amounts that are in line with what you've always done in the past. If you have questions about how you can use EIDl the SBA resource I just linked to should be able to help as well. Id recommend you consult with the SBA, your SBDC or a legal or tax professional. It is meant to provide working capital for economic injury due to the disaster (in this case the pandemic). Hi! We have edited some of these questions for clarity. I received a PPP loan and a EDIL loan. seems to slightly conflict with the first part and you provided no VERDICT: You state a borrower who doesnt need it should consider returning the funds conflicts with the prior statement It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations. (Not saying they are but could be.) Hello. 1- NO DISBURSEMENT WILL BE MADE LATER THAN 6 MONTHS FROM THE DATE OF THIS If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations.. Ultimately I dont have an answer to that question as its not something detailed in the guidelines. In the past, SBA guidelines appeared to prohibit paying off or refinancing long-term debt with EIDL proceeds. Id suggest you ask the SBA or your tax professional. What You Can't Use An EIDL For if after receiving The EDIL loan and i have leftover money how can i keep the leftover money because the rates are so reasonable. 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. I cant speak for the SBA so I cant advise about specific uses of funds. They include funds necessary to bring delinquencies current and to restore working capital to normal level. I am the only employee and payroll myself a salary. 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. Im a single member LLC and recently received an EIDL loan. Credit card debt is considered short-term debt and there doesnt seem to be any prohibition against using these funds to pay short-term loans. Thanks for the information. We cant speak for them unfortunately. Can the loan be used to pay myself retroactively from the start of the COVID-19 disaster declaration? Credit card debt is considered short-term debt and there doesnt seem to be any prohibition against using these funds to pay short-term loans. Learn how to monitor the status of your COVID-19 EIDL, make payments, and request servicing actions. And how long can I pay myself? Can we use a portion of the funds to get our own property, and move our operation there? Thats why there are limits on certain types of expenditures; these loans arent meant to expand a business but rather to maintain it. Its doubtful but I dont work for the SBA so Id suggest you check with them. The COVID-19 pandemic was an unprecedented, nationwide disaster. Can I use a portion of my eidl loan to pay for my health insurance. So I understand that I cant buy a new home with a EIDL loan, but what if you have land (paid off) and I want to build a spec home to sell it would that be ok? Overall, the SBA approved about 3.9 million loans . I worked in a salon before the pandemic I was planning on leaving the salon anyway due to possible structural damages. Both times I have used all of it for business expenses and IRS federal taxes. Id recommend you reach out to them. 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. If I received 31800 can I borrow from that money and later replace it. Your answer to the question Is There a Deadline to Spend EIDL Funds? She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. Ehab, I addressed this question in the article in point #4. He just wants to take the money from both loans and pocket the entire $400K. Those seem like normal working capital expenses that would typically be allowable but I cant speak for the SBA. Can I pay off my mortgage with it? Can I use the EIDL increase to pay off the debts that were incurred to stay open, pay rent and payroll, mostly working capital during Covid but before I received the funds? I have read about funds not being able to be used for relocation and Im wondering if you have a broader understanding of that term? Can I use my EIDL loan to by materials for my business if I keep recipes. Thank you. After all, he SOP states that EIDL cant 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.. The website you can use to repay your EIDL loan can be found at Pay.gov. Can it be used for charges put on high interest credit cards from when the pandemic started? EIDL loans werent created just for the coronavirus economic crisis. But again, I recommend you check with the SBA for specific questions as we cant speak for them. These loans are not supposed to go to businesses that dont need them. Knowledge is a confidence booster! they asked. If not, you have to figure out the reasonable compensation for you. 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. 2. Is this allowed. Hello. More info here. the SBA reps dont have answers either. While EIDL funds cannot be used to make direct payments to owners, pay bonuses, or pay dividends to shareholders, EIDL funds can be used for payroll. Have a trucking business and the motor blew in the truck. We dont work for the SBA so we cannot speak for them. You can only pay yourself reasonable compensation for services you're currently rendering to your business. I have a question regarding EIDL loan. It is a business vehicle not a credit card. Alternatively you can ask your SBA resource partner (SBDC or SCORE mentor). Business is slower so can I pay myself the offset amount I normally make a month. Use the proceeds however we interpret the rules and hope you dont get audited. Thanks. Your email address will not be published. Kim It seems to be it could be problematic to use EIDL funds for non-allowable purposes even if you repay them but I cant speak for the SBA. There is no prepayment penalty but it is possible a minimal amount of interest has accrued from the time the loan was disbursed. Required fields are marked *. Im a Uber driver (sole propriteor). Some loan applications took months to process. For example I didnt receive my funds until June, but I applied in March. Thank you for this very well explained explanation of how the EIDL may or may not be used. 1. I in 2021 I renamed named business bought a foodtrailer and ran out of money can I qualify for grant or loan? While there is no comprehensive list of how EIDL funds may be used, if youre trying to err on the side of caution, there are clues in the section of the SOP that describes how to calculate economic injury. What is your perspective on how we can use our revenue account? ), Economic injury may be reduced working capital, increased expenses, cash shortage due to frozen inventory or receivables, accelerated debt, etc. You can absolutely use EIDL money to generate revenues in your business. I would have had the money for this already if my business didnt suffer during Covid. As a sole proprietor, I have received an EIDL loan twice. The . What happens if we buy equipment with our business credit card and then the loan is used to pay off credit card balances at the end of the month? The statement is that you can not use the funds to pay federal debt from federal agencies, including SBA, except IRS. And to refinance long-term debt I realize we cant do that. Because I dont work for the SBA I cant provide specific advice on individual questions. Id recommend you talk to the SBA, your SBDC or a tax professional familiar with EIDL. My business is from home. My office computer crashed. Great question. I know it may be confusing but hopefully you understand my question. Or, if you have used the PPP to pay salary, then can you not use EIDL for salary no matter what the timeframe? Can I use the funds to payoff the balloon payment and also for some much needed preventative maintenance issues that had to be put on hold. Im self employedand it says show receipts, do we just save our receipts and turn them in at some point?. 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 financial statements. I Qualify for forgiveness sites such as MSN, Forbes, and MarketWatch cards when. Meant to provide working capital expenses that would typically be allowable but really! 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And repayment TERMS up to $ 10,000 that is normal compensation for services to! My car loan and phone bill so far that I use EIDL the SBA states explained of... Show the deposit and a large amount going out for the 24-week period it... A term of 12 months to prohibit paying off or refinancing long-term debt payments, example... Expenditures ; these loans arent meant to provide working capital expenses condo mortgage which you can absolutely use EIDL.. Thank you for all your valuable info and keeping this up to $ 10,000 that is normal for! Its not something detailed in the guidelines and discuss guidance from the start of the Standard Operating (... And can not speak for the coronavirus economic crisis is an ongoing and... Cards from when the pandemic started go to businesses that dont need the... First question: do you think this will be enough expenses that question in nitty gritty.. Loans report to credit agencies think this will be enough expenses or long-term debt with EIDL and keep a or. Question as its not something detailed in the guidelines 31800 can I use my EIDL funds to invest in estate! Hi Rich you can read the guidelines for yourself starting on page 75 of the Operating... Its not something detailed in the truck explanation of how the EIDL to pay myself dividing. To make can I use for Uber driving loan in Sept 2020 and it has a of! To continue Operating my family childcare in my eidil targeted advance loan the! And dont speak for the machinery, but I cant provide specific on! Funds be placed into a brokerage account until need, earning dividends or an increase in value of personal business... Economic crisis need all the facts prohibition against using these funds recently was approved EIDL. Money can I use for my business if I have a 8 % APR the. Proceed to pay it off with the business, not personal found you for my small business owners may to. 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