They offer free counseling to small business owners. Or you can reach out to the SBA if youre not sure how you can use your loan proceeds. Thanks again. 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. 1. I am the sole owner of a S Corporation. 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? Who will notify me? These loans are not supposed to go to businesses that dont need them. 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. Extraordinary items can include: (1) Temporary rent or storage fees, additional advertising costs, etc. 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. Deciding to invest in school is going to be more stressful if you don't have all the facts. This article offers some suggestions for getting help with your EIDL loan. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). 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. I have a question regarding EIDL loan. to help your business stay afloat as you wait to resume normal business functions. Of course youll want to track that. Thank you! Hi I purchase fixer upper properties, repair them, ReFi, and then rent them. We cant comment on this scenario unfortunately. 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. Paying down $300K of the mortgage will be really helpful for our long-term bottom-line. 2. EIDL should not. I raised it in this article: 7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP. Comment * document.getElementById("comment").setAttribute( "id", "a9a2b4e06494c0a0b8632873f9d8768d" );document.getElementById("h09971f2bf").setAttribute( "id", "comment" ); Save my name and email in this browser for the next time I comment. I am a truck driver (owner operator) and recently applied and was accepted. We received questions from entrepreneurs whose businesses were not likely to survive the pandemic downturn and wanted to know if they can use funds from one of these loans to start something new: I am an Uber driver and I got approved for an EIDL loan. An accounting software or service can help you avoid costly mistakes and get a clear picture of your overall finances. Do I need to add my backpay onto Form 2202 Statement of Liabilities. Can it be used for charges put on high interest credit cards from when the pandemic started? If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). I am a family childcare provider who operates in my home. And thanks for the kind words Susan! 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? You can categorize the Economic Injury Disaster Loan (EIDL) as Personal Income in QuickBooks Self-Employed. Am I able to payoff the private loan with the EDIL funds? Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. I would like to hire an employee that could bring me more business. 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 ? I gotten in my eidil targeted advance loan of the 9K If they cant help an SBA resource partner may be able to help. Here's how: Go to the Transactions menu. Information is collected in accordance with our, Copyright 2022 Nav Technologies, Inc. All Rights Reserved, California loans arranged pursuant to Department of Financial Protection & Innovation Lenders You can locate your local office here. Very helpful article Gerri. 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. Whats Best Practice for Tracking the Use of My EIDL Funds? It says: The changes to the regulation at 13 CFR 123.303 apply to COVID EIDL loan proceeds available on or after September 8, 2021, without regard to the date such proceeds were received from SBA. Later youll see that section refers to how loan proceeds may be used. I have been collecting Pandemic Unemployment Insurance. Snacks (?) Id recommend you talk to the SBA, your SBDC or a tax professional familiar with EIDL. 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. Although the EIDL loan can't be used to refinance debt or repay federal debt, there's an exception for tax debt. 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. Extraordinary items can include: (1) Temporary rent or storage fees, additional advertising costs, etc. I do have UI but when I report even minor earnings my benefit is less than $100 for 2 weeks even with the temporary $600 from the fed so thats useless. Millions of the Small Business Administration's Covid EIDL loans are now coming due, and experts say borrowers have few options if they can't pay. Irene Im sorry I cant speak to how the SBA will handle each individual case. 2- Im a sole owner company (Engineering Consultation) Lets call it Business A, I partnered with another person (same business/industry) Company b can i use the money i got from SBA EIDL under business A to to pay salaries for Business b or it that consider expanding business? Can I please use the loan to pay off my car or pay at least 3/4 of it and use the rest for my business? 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. For example, whats the formula I would use to pay myself? I got the loan 3 years ago(Total Maturity 7 years). 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. Some loan applications took months to process. Based on the new forgiveness application form 3508EZ if you received your PPP loan on or before June 5, 2020, you may choose an 8-week Covered Period or a 24-week Covered Period. Completed all required documentation, was accepted ,approved ,and signed the paperwork on Jan 13th . Thank you for this informative article. However, she wont respond to my questions of what she is planning to do with the money. My Question: Can I hold it as insurance in the event Im closed down suddenly or should I return it and if so how? 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. This business has also been shut down due to the virus. 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. Id recommend you reach out to your SBA District office to see if they can advise. 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). . Two questions, both relating the recent rule changes. 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. Can I use EIDL Loan to replace an engine on a broken down work van to get it operating again? This article was originally written on July 1, 2020 and updated on February 2, 2023. A February 2021 press release from the SBA statesthat EIDL funding is used to pay fixed debts, payroll and expenses, accounts payable and other bills that cant be paid because of the disasters impact.. Do you have any advise for me? RE: Is There a Deadline to Spend EIDL Funds? Your answer to the question Is There a Deadline to Spend EIDL Funds? Im hanging on by a thread now. I am an uber driver. 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 not then it may be questionable. Id encourage you to talk to the SBA, SBDC or your legal advisors. loan proceeds must be used only for eligible payroll costs and certain eligible nonpayroll costs as set forth in program . 1- NO DISBURSEMENT WILL BE MADE LATER THAN 6 MONTHS FROM THE DATE OF THIS First, buying a home clearly falls outside the intended uses of EIDL. Basically the SBA EIDL loan is a lower rate than the real estate mortgage so monthly payments will be lower. I have recently applied for and received a EIDG and EIDL for my small business. I want to sell my business which has an EIDL loan. Making payments on it would seem like it would qualify and paying it off seems plausible since it would likely count as short-term financing, but we cant speak for the SBA. I did get an EIDL loan for my business, is it still ok to seek other funding like an advanced sales loans through our credit card gateway provider? We recommend you check with the SBA or an SBA resource partner like SCORE or your SBDC. Shelley I am not sure to be honest. Started a business back in 2019 covid-19 hit and it failed in july2020. 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. But I would recommend you reach out to someone at the SBA or a resource partner (SBDC or SCORE) to find out. Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. Id recommend you talk with your state unemployment office. Again we cant speak for the SBA. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. Id recommend you talk to the SBA, your SBDC or a legal or tax professional familiar with this program. 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. SBA representative told me the only thing you can pay for short term loans (speaking business credit card)is the Min pay min. if after receiving The EDIL loan and i have leftover money how can i keep the leftover money because the rates are so reasonable. The cost of ordering summer inventory represents an additional need., Ineligible Use of EIDL Funds / What You Cannot Use EIDL On. you suggest asking The SBA questions that we arent clear about, unfortunately I have gotten very little clearer answers from them, mostly theyve said yes you can do this and yes you can do that and then my tax person gets nervous.. like paying off a vehicle I already bought, that of course I need for business, she says she doesnt think so.. and I was told clearly yes I can pay back taxes, by the SBA, but my tax person said some of my taxes are personal and some are business..ive had a heckuva time getting any clear answers for many months. Check with an advisor before you go this route. So, i am going to pay off the SBA loan before the end of the year because the restrictions give me an anxiety. I know it says paying fixed debt is an acceptable use. Hi Jeff I am hesitant to advise on specific situations as I dont work for the SBA. Would you recommend that give low interest loans ? Im a Uber driver (sole propriteor). Verdict: Yes, except to prepay certain federal debts. Knowledge is a confidence booster! As a sole proprietor Ive looked high and low trying to find expert advice on how I can use the EIDL for my small trucking company. Thanks. We reimagined cable. My business is from home. In other words, lets say your average weekly profit from 2019 was $2,000. 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.. I have not seen this question addressed in SBA or Treasury guidance unfortunately. I dont have a location so Im stuck. The Interim Final Rule from the SBA describes on the first page which changes are applicable when. The EIDL guidelines arent specific enough for me to offer advice on individual situations. 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.**. Thank you so much for your insight! Im so confused now. It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations. (Ive used the Disaster Loan Standard Operating Procedures to write about this topic.). But if you continue to work in your business, paying yourself for the work in the business appears to be a reasonable use of these funds. Can I side the funds to advertise ? If your PPP loan is forgiven its doubtful it will report. In addition, the SBA recently allowed EIDL funds to be used to refinance certain types of debt. Check with the SBA. This article describes how to get help with your questions about EIDL. Great article! Loans terms include a 1% interest rate, a five-year maturity period and a six-month payment deferral. (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.) Thank you in advance! I should add that I am not trying to inspire fear, and I assume the SBA is not either. : My entity (C-corp) that is requesting the EIDL loan is operating from a building and pays rent to a separate entity (LLC) that owns the building. Can EIDL Be Used to Buy a Vehicle or Home? Im a single member LLC and recently received an EIDL loan. Can I payoff my car loan at once instead of paying monthly payments to save on high interest? (The EIDL grant does not have to be repaid.) Our revenue is deposited into a different account. Its confusing out here! But again I dont speak for the SBA. One Uber driver who says they were approved for a $45,000 EIDL wanted to know if its OK to use that money to buy a home. Have a trucking business and the motor blew in the truck. I dont have a definitive answer for you. I know I can pay insurance, gas, repair etcwith it but Is it okay to use part of that money to just PAY OFF MY CAR which is over 20k? I know it may be confusing but hopefully you understand my question. Not a non-profit) But keep in mind the purposes of this loan. I have applied for an EIDL Loan. If you received your loan after June 5, 2020, you apply based on the 24-week period. ), Economic injury may be reduced working capital, increased expenses, cash shortage due to frozen inventory or receivables, accelerated debt, etc. The Standard Operating Procedures dont mention back pay. 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." They include funds necessary to bring delinquencies current and to restore working capital to normal level. 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. 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. If the funds are not used properly that could create liability issues. Payment Deferral: I have 2 barbershops and I want to downsize . 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? Because of Covid and other business expenses, the entity requesting EIDL funds (C-corp) is behind on rent payments. 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 havent published guidance from the SBA that goes into that level of detailed advice. You may want to check with the SBA. These low rates have led many to ask whether they can use these funds to pay down or refinance other small business loans. also here is the SBA Phone number 1-800-659-2955#1 for english #2 how the pandemic has effected my business. It is used for my 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. Thanks for your insights. 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. Your accountant may be able to help. That sounds reasonable to me. Additionally, could funds from the revenue account be invested as they are accounted for independently of all loan proceeds? I ran out of supplies due to the shortages during the pandemic. If I received 31800 can I borrow from that money and later replace it. We cant speak for them unfortunately. (Not saying they are but could be.) Id recommend you talk to the SBA, your SBDC or a legal professional. 1. Is it acceptable to pay this with the EIDL to give us a little breathing room? Your opinion is greatly appreciated. So the pandemic hit and not being able to pay the existing rent from not working, there I decided to leave the salon for both of those reasons. 1. We have not seen any indication that will be the case. Normal expenses incurred to run your business are fine. You are very knowledgeable and very fortunate to have found you. In fact, theyve been part of the SBAs Disaster Loan program for many years. Our interest rate is higher than 3.75%, and isnt amortized for 30 years. Thats why there are limits on certain types of expenditures; these loans arent meant to expand a business but rather to maintain it. Can I use this money to buy parts on online and resell them on ebay? Similarly I would not invest the funds without checking with the SBA. Thank you. Could you please offer some insight? Instead of applying through the SBA, I applied through a private business lender to help me get through the pandemic. 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. You can also make payments on your federal business debt (e.g. I tried to address your question about payroll in #1 in this article. Overall, the SBA approved about 3.9 million loans . 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). The EIDL agreement requires any borrower accepting a loan of more than $25,000 to pledge an extensive list of collateral: "For loan amounts of greater than $25,000, Borrower hereby grants to SBA . I believe the problem is Judy that there is not an exhaustive list that addresses all scenarios. I still am not clear if I can accept an Economic Injury loan/grant and collect unemployment as well. Hmmm, to be used to pay any type of business debt, including loans owned by a Federal agency (including SBA), 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). 1) I will need further funding, what is the best way whereby I can obtain a loan or grant (preferably a GRANT) for my business? As for reimbursing yourself for money you paid via savings, the guidelines dont get that specific. Please let me know your thoughts. For example, in the spring, a clothing store located in a disaster area is left with an inventory of winter clothing and has no funds to order summer stock. Andrew It seems that would be a normal working capital expense that should be covered, and its not on the list of prohibited uses, but we cant speak for the SBA. (Remember EIDL was not the popular and extensive program it has become when COVID hit so there isnt always guidance that addresses all scenarios.) It seems clear you cant pay yourself unless its for work you do in your business. (Note: the SBA opened up EIDL to religious organizations impacted by coronavirus. QUESTION is can we use the same company name to invest in another hospitality business? 2. Millions of the Small Business Administration's Covid EIDL loans are now coming due, and experts say borrowers have few options if they can't pay. Great article! Thank you, this is all very helpful. (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. The guidance I shared in this article came from the Standard Operating Procedures for Disaster Loans which you will find here. We have edited some of these questions for clarity. Could I use that loan to find another place in my county? 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. Do you think the SBA would approve this scenario or is there a better way to ask. It states here in this article as well as the SBA SOP on page 75 as you stated here that funds can be used to pay IRS debt. 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. However they dont detail every scenario and since I dont work for the SBA I dont feel comfortable providing specific advice. I have a medical issue and want to change my line of business. What will happen to any left over funds if not all used within that timeframe? Just a small cleaning business. I cant speak for the SBA but generally materials for the business are normal working capital expenses. Hi Gerri, thanks for such great information. Just as there have been audits and inspections of past disasters, there will be scrutiny of some of these loans as well. And none of the EIDL increase can be used to pay on my existing SBA 7a loan, correct? Thank you for all of this information. Could you answer a few self employed EIDL questions for me? Keep in mind the overall purpose of these loans is to help businesses survive a disaster and to meet the normal operating expenses that they couldnt pay due to the disaster. Rent or storage fees, additional advertising costs, etc sole owner of a Corporation. 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