I know it says paying fixed debt is an acceptable use. If they cant help an SBA resource partner may be able to help. Can I use EIDL to buy a vehicle for driving Uber because it is my only source of income for the last 3 years?. Since thats a combination of personal and business expenses, wed recommend getting professional advice before using EIDL that way. My suggestion Tom is that you check with the SBA. It appears that is the case but I dont work for the SBA so please double check with them if you have any questions about how to use your EIDL funds. Roland the guidance doesnt go into specifics like that. Others lump it together with the term expanding your business. The Standard Operating Procedures dont mention back pay. Could I use that loan to find another place in my county? If want to buy a house can I apply for a loan to buy a house? But I dont speak for the SBA. 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. Do not rely on this article for specific information on how to properly spend your EIDL funds. Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. You're not alone, after doing some research I'll be answering that question in this video. Can I use it to switch business industries and start new business?. You can certainly reference page 75 of the SOP as a guide. Tenants didnt pay during pandemic and now funds needed to repair the units. Ana Are those normal business expenses that your business pays or deducts on its tax returns? GREAT article! Thank you! a reasonable use of these funds. Jo the SBA has not released specific guidelines to answer your question. 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. 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. Our revenue is deposited into a different account. Remember that ineligible uses of EIDL proceeds include acquisition of fixed assets and fixed assets usually include vehicles. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers. According to new changes on SBA website, It states that proceeds can be used and to pay business debt incurred at any time (past, present, or future). 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.. Your local SBDC or SCORE would be a great resource for that information. My office computer crashed. Do you have any advise for me? It would be a good idea to reach out to them. However, she wont respond to my questions of what she is planning to do with the money. Can $ be used to pay us what we normally would have made?. 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. However, I do not speak for the SBA so Id recommend you contact them or a resource partner. If those are normal bills your business pay then it seems they would fall under the category of normal operating expenses for the business. I ran out of supplies due to the shortages during the pandemic. 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? Because I dont work for the SBA I dont feel comfortable commenting on a specific scenario Im sorry! Interest Rate and Term: Businesses: 3.75% fixed for 30 years . So, i am going to pay off the SBA loan before the end of the year because the restrictions give me an anxiety. Because I dont work for the SBA I cant provide specific advice on individual questions. I used this loan only for the business, not personal. It is in my name because my business did not have credit when I financed it. That may be for months, a year, or even longer, depending on a number of factors. Can i use eidl to pay for that? We dont work for the SBA so we cannot speak for them. Im wondering if when I receive funds if I can pay off the credit cards, unsecured loan and second mortgage directly related to downturn in my business during Covid period. 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. If you have specific questions Id encourage you to reach out to the SBA or an SBA resource partner such as those described in this story. Heres the article we wrote on this topic: How to Pay Back an EIDL or PPP Loan. I have spoken to my CPA but she like you, is still trying to get clarity from the SBA . You've got to pay it back. 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. other SBA loans). We tried to provide helpful information in this article but beyond that we recommend you check with the SBA or your local Small Business Development Center/SCORE. We have lost income to ourselves as no one is wanting us in their house to clean. It is an essential part of my business which has been hit hard. I am a truck driver (owner operator) and recently applied and was accepted. Its a day to day situation so I decided to accept the EIDL ($6,000) to pay some bills now but mainly in the event we are shuttered and with the likelihood their will be a next wave in the fall which is only 4 months away. After all, the 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." Do these rule change apply retroactively to EIDL funds already received or approved? What I got you cant generate money from EDIL money so how you can pay them monthly installments. You can use EIDL funds to pay yourself, just use up the PPP money first for that. Hi. Months later I applied for the loan with no location. If you are still having trouble understanding how to use these funds in your business, I recommend you contact your local SBA resource partner (SCORE or SBDC for example) for free help. What about for the lump payment the short term lender usually asks for? Im so confused now. Id consult with them or your tax professional for specific advice. There is no prepayment penalty but it is possible a minimal amount of interest has accrued from the time the loan was disbursed. Its reasonable to assume that formula could be used to calculate owners compensation for EIDL as well. Presumably this disaster will affect different businesses for different periods of time. Paying yourself and your employees (if you have them) is not only legitimate but necessary to keep your business running. We had started to renovate the garage prior to covid 19 and would like to use this money to.complete the project based on safety protocol. I own a home daycare and would like to hire my 13 year old daughter to assist me in my day to day operations/ can I use the EIDL funds to pay her? (Not saying they are but could be.) Similarly I would not invest the funds without checking with the SBA. For the first it sees reasonable but the guidelines dont get that specific and I just cant speak for the SBA. If I received 31800 can I borrow from that money and later replace it. Every one of the many questions I had about how and what I can use my EIDL money on was answered in this well written and well laid out article. You can contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. Can I use my EIDL loan to by materials for my business if I keep recipes. These low rates have led many to ask whether they can use these funds to pay down or refinance other small business loans. That does not appear to be an acceptable use of EIDL funds based on the definition we discussed earlier: 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. In addition, if relocation is an ineligible use for an existing business, its doubtful that starting a brand new business would be considered acceptable use. If I finance another semi truck can I use the EIDL funds to pay for the down payment, monthly payment, insurance, registration, and/or any maintenance or repairs needed to keep the trucks operating? I suppose if you charged a new vehicle to the card they used EIDL to pay it off that could be an issue but otherwise I dont see why it would be an issue. Unlike the Paycheck Protection Program, a COVID EIDL loan is not forgivable. What is your perspective on how we can use our revenue account? 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. Thanks again. 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. Find local help here. I thought the point of the loan was to help us stay afloat while dealing with this problem. Required fields are marked *. I cant speak for the SBA though so if you need specific guidance, Id encourage you to contact them. 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. These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. Im sorry I misread that. they asked. 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. Although their work was directly responsible for new revenue, can I still label payments from my company to them as coming from the EIDL money? Id recommend you consult with the SBA, your SBDC or a legal or tax professional. The COVID-19 economic crisis is still creating problems for some businesses. There is no prepayment penalty. EIDL loans carry a low interest rate and a 30-year repayment term and can offer a lifeline to struggling small businesses. EIDL proceeds may not be used for: The type of work you do to earn your pay does not appear to be restricted. Thanks for the information. A report from the Office of the Inspector General found that in previous disasters some borrowed from the EIDL program when they really didnt need it. Right now, the EIDL can cover up to six months of working. He has an SBA loan for 150K payable in 10 years and just got another one for recently for 250K payable in 30 years. My understanding is that you can pay yourself legitimately you can do whatever you want with personal funds. Your accountant may be able to help. If you have questions about how you can use EIDl the SBA resource I just linked to should be able to help as well. We cant advise you specifically though it seems that generally that car payments, insurance and gas would be normal working capital expenses for an Uber driver. Do I need to add my backpay onto Form 2202 Statement of Liabilities. Please tell me if this is right or wrong.. A friend has a business he wants to sell me. 1. Does this fit within the guidelines of the loan? If not, you have to figure out the reasonable compensation for you. Id recommend you talk to the SBA, your SBDC or a legal professional. Standard Operating Procedures for Disaster Loans (SOP 50 39), 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. As for other small business loans, Nav can help match your business to other loans but whether or not they will have a low interest rate will depend on an number of factors including credit scores, revenues, time in business etc. You may be able to get help for free from SBA resource partners. (Locate your local office at SBA.gov.) Thank you so much in advance for answering. And if you cant get a loan because no fund in SBA or PPP who It appears that buying a vehicle does as well, even if it is a business purchase. Can I still take funds specific to dividends / draws? Im concern some may not apply due to the Covid pandemic. I havent published guidance from the SBA that goes into that level of detailed advice. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. I see no reason why you cant use EIDL to pay an employee if that employee is supporting the ongoing operations of the business during the disaster but I cant speak for the SBA. 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). 3) I have an older car with high miles that I drive for Uber, can I trade-in my older car to buy lower mile car to drive for Uber with the EIDL loan proceeds? I dont have a location so Im stuck. (Keep in mind you should only use EIDL funds for business purposes, such as paying off business credit cards, and not to pay off personal credit card debt.). I tried to address that question in point #4 in this article. Your email address will not be published. Thank you. I havent seen that specific question addressed in guidance. 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. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. The Economic Injury Disaster Loan (EIDL) is a federal small business loan program made to support small businesses' recovery from the economic downturn caused by the COVID-19 pandemic. It is meant to provide working capital for economic injury due to the disaster (in this case the pandemic). Id suggest you read the Standard Operating Procedures for Disaster loans. may i use funds to repair cosmetic damage to the car? Im self employedand it says show receipts, do we just save our receipts and turn them in at some point?. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant; Repayment of stockholder/principal loans, except when the funds were injected on an interim basis as a result of the disaster and non-repayment would cause undue hardship to the stockholder/principal; Expansion of facilities or acquisition of fixed assets; Repair or replacement of physical damages; Refinancing long term debt (SBA later made an exception here; see that change described below)). ; (2) Accelerated debt due to the disaster; (3) Inventory replacement may be an extraordinary item. The EIDL guidelines arent specific enough for me to offer advice on individual situations. If you use accounting software, you can put a note EIDL on those expenditures and keep a file or attach receipts. Michael Ive tried to share guidance based on the Standard Operating Procedures (SOP) for Disaster Loans which you can read here. Its doubtful but I dont work for the SBA so Id suggest you check with them. However, being fearful of what expenses can or cannot be used, I have loaned my company several thousand in the interim to keep payroll, short term expenses and day to day expenses. 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. Great article! I applied for an EDIL loan and was approved. Otherwise, the article is a wonderful summary of EIDL requirements in easy-to-understand language. That changed. EIDL proceeds can be used to cover a wide array of working capital and normal operating expenses, such as continuation of health care benefits, rent, utilities, and fixed debt payments. Thank you. I also applied for and already received funds from an EIDL earlier this month. 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