Sadly my wife and business partner acquired a 150k EIDL and then decided to move the funds into a separate account. Does forgiveness loans and EIDL loans report to credit agencies. Thanks. Even though you paid yourself in a lump sum using the PPP, sole proprietor/independent contractor compensation is considered to be 11 weeks of owner pay under the rules of the PPP. Michael Ive tried to share guidance based on the Standard Operating Procedures (SOP) for Disaster Loans which you can read here. Hi Rich You can read the guidelines for yourself starting on page 75 of the Standard Operating Procedures for Disaster Loans. Because I dont work for the SBA I dont feel comfortable commenting on a specific scenario Im sorry! I also want to point out its a 30 year loan Im paying interest on along with a origination fee Any helpful advice is much appreciated. 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. I only wish there were some kind of industry specific guidelines we could follow to keep us out of trouble with the SBA. 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. So before we dive into specific questions, lets look at how these loans were designed to be used. Could you please offer some insight? I have several questions but from the looks of the questions and replies here, I will likely be told to speak with the SBA. Greg, As I stated in the article the SBA says: Our accounts will show the deposit and a large amount going out for the machinery, but overall there will be enough expenses. 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? My lease on my truck is coming to an end and I have a balloon payment. Besides second draw PPP loans the main option is EIDL loans. The Interim Final Rule from the SBA describes on the first page which changes are applicable when. Our monthly rent went up. I woukd like to use the loan to continue with a establish a safe place to continue operating my family childcare in my home. The statement is that you can not use the funds to pay federal debt from federal agencies, including SBA, except IRS. I rent spaces now. Do you think the SBA would approve this scenario or is there a better way to ask. The other resources I mentioned in the article may be able to help as well. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). I believe it happens within approximately ten days. 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." 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. I got approved for an edil loan can I use those funds to buy more supplies? Could the loan be used to pay say, a year in advance, on a piece of equipment? 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. 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. I have recently applied for and received a EIDG and EIDL for my small business. The SBAs published guidance did not address this question. Is it true that I wasnt supposed to use the funds to payoff any federal debt? As long as you are using it to pay expenses that are normal working capital expenses I dont see any problem using it to pay the expenses then using EIDL to pay the credit card bill. If not, we wont have a business to spend the money on. Id recommend you check with your local SCORE or SBDC office they are helping small business owners for free. LOAN AUTHORIZATION AND AGREEMENT UNLESS SBA, IN ITS SOLE DISCRETION, We have edited some of these questions for clarity. I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. Id recommend you reach out to your SBA District office to see if they can advise. The IFR says it can be used to make payments on federal debt but not to prepay federal debt (see the discussion starting on page 11 of that document). Im sorry if youve already covered this previously but were wondering besides the second round PPP if theres any options or resources for us reapply mabe or request More funds beyond the $150,000k that we received last year. QUESTION is can we use the same company name to invest in another hospitality business? You can always check with them. Great article. A certain percentage of my house payment gets written off on my taxes. I am the sole owner of a S Corporation. However, I dont work for the SBA and cant advise one way or the other. Can I payoff my car loan at once instead of paying monthly payments to save on high interest? Thank you for helping. Tell me what I need to do. Andrew I cant speak for the SBA on this question. I tried to address that question in point #4 in this article. 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 have read about funds not being able to be used for relocation and Im wondering if you have a broader understanding of that term? (I am not sure what you mean by it is clear we cannot use the EIDL to pay the building center directly I am not sure what type of expenses you are referring to for the building center?). Their entire PPP loan is potentially forgivable. Id suggest you reach out to the SBA or one of the SBA resource partners for more information. 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. Can I use my EIDL loan to by materials for my business if I keep recipes. Hi! EIDL proceeds may not be used for: I have not seen this question addressed in SBA or Treasury guidance unfortunately. Many SBA regional offices are holding office hours to answer questions about these loans and that could be a good opportunity to get an answer to your question. Interest Rate and Term: Businesses: 3.75% fixed for 30 years . PPP loans are still available I am not sure I understand your comment about no fund. For example, whats the formula I would use to pay myself? I wish I could say but I havent found a specific formula, unfortunately.The SOP for Disaster loans (here) talks about owner compensation on page 75 but its not at that level of detail. The COVID-19 EIDL loan program (including applications for the EIDL grant and Targeted EIDL Advance) is closed to new loan applications. Use Nav to find the right accounting solution for your business. Many business owners, including the sole proprietors and independent contractors who got these loans, have never used a government loan program like this before and are worried about the possible consequences of using their EIDL funds incorrectly. My business is operated out of my home. I dont have a definitive answer for you. Very helpful article Gerri. Do you have any advise for me? 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. Please contact the SBA if you have additional questions. Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. How Much Can I Pay Myself and Qualify for Forgiveness? Id recommend you either talk to the SBA or get in touch with SCORE or your SBDC to see if they have advice. Your local SBDC or SCORE would be a great resource for that information. I meant to give 5 stars and accidentally hit 4 and it wont let me change it. Based on what you are trying to do those expenses could be problematic. I used this loan only for the business, not personal. 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." EIDL loans carry a low interest rate and a 30-year repayment term and can offer a lifeline to struggling small businesses. But again I dont speak for the SBA. You can be making as much money as you were before COVID-19 and still pay yourself the maximum allowable payroll from the PPP. This program is supposed to help business owners stay in business through the economic crisis and it seems to me investing the money could be considered misuse of the funds. Payment of any dividends or bonuses; Thank you, this is all very helpful. I recommend you reach out to the SBA or one of its resource partners. In this case am I correct in thinking it could be used to pay IRS business debt? For the second question, I would be very careful. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. 1) I received the EIDL loan in December 2020. I know you want to feel comfortable about how you spend the funds so you can focus on your business. There may be other state or local programs available I would recommend you contact your local SBA resource partner for more information. Can I use EIDL Loan to replace an engine on a broken down work van to get it operating again? They offer free counseling to small business owners. My business struggles and would help me to pay off my debt. At the time, I couldnt find any information that indicated if the EIDG/EIDL would effect my unemployment. Do you think EIDL can be used as a down payment to flip a house by a professional house flipping company. Id recommend you talk to the SBA, your SBDC or a legal professional. I cant speak for the SBA though so I recommend you check with them. Many small business owners arent familiar with the term working capital, though, and as a result they find that description confusing. They dont answer every question in nitty gritty detail. Thank you for this article! Id recommend you talk with your state unemployment office. That may be for months, a year, or even longer, depending on a number of factors. Overall, the SBA approved about 3.9 million loans . thanks. Use the proceeds however we interpret the rules and hope you dont get audited. Ask Your Own Tax Question Ok. 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). Thank you for this very well explained explanation of how the EIDL may or may not be used. Appreciate you compiling it all for us. We recommend you check with the SBA or an SBA resource partner like SCORE or your SBDC. Thank you for all of this information. That sounds reasonable to me. Ultimately I dont have an answer to that question as its not something detailed in the guidelines. Hi Gerri .. The Standard Operating Procedures dont mention back pay. Ive seen different interpretations of whether we can use our Revenue for items excluded from use from the EDIL. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. Businesses with fewer than 500 employees, certain nonprofits, and agricultural businesses can apply and be approved if they meet all criteria set by the SBA. But Id check with the SBA or your tax professional about any specific questions. After all, the 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.. Thank you. Glad this was helpful! 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. 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. Fact: You can actually apply and be approved for BOTH of these programs. Hi, This article details options for getting help with EIDL loans. We were approved, have no employees. Can i use eidl to pay for that? 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. Two questions, both relating the recent rule changes. 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 am an ber driver. Can you please provide any recommendations? Can I buy a place with it? Does this fit within the guidelines of the loan? Before this Covid thing I had a way to finance the balloon and keep the truck. That seems to be the purpose of the loan to pay normal and ordinary expenses the business cannot pay due to the disaster. The EIDL guidelines arent specific enough for me to offer advice on individual situations. We'd love to hear from you and encourage a lively discussion among our users. The website you can use to repay your EIDL loan can be found at Pay.gov. Started a business back in 2019 covid-19 hit and it failed in july2020. Im currently not driving because of the pandemic. Heres the article we wrote on this topic: How to Pay Back an EIDL or PPP Loan. We dont work for the SBA so we cannot speak for them. Can EDIL loan be used to make repairs and pay off the mortgage? It seems like a plausible use of funds. 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? But thank you for the dry reading. the SBA reps dont have answers either. Please answer. Hope it helps! For example I didnt receive my funds until June, but I applied in March. I raised it in this article: 7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP. Thank you for all your valuable info and keeping this up to date. 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? Can $ be used to pay us what we normally would have made?. Ive only had money going out and no funds coming in. The business must repay them. Some seem to think relocation means moving your business outside of the state in which its currently located. Dont waste hours of work finding and applying for loans you have no chance of getting get matched based on your business & credit profile today. Remember that ineligible uses of EIDL proceeds include acquisition of fixed assets and fixed assets usually include vehicles. Id suggest you talk to the SBA or your SBDC. (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. You must have your 10-digit loan number and a payment amount in order to pay it back. Can $ be used to pay us what we normally would have made?. Monica please re-read the part in the article that says: 8. I have been collecting Pandemic Unemployment Insurance. Basically, I went from $165K gross receipts in 2019 to nearly $0 in 2020-21. Basically the SBA EIDL loan is a lower rate than the real estate mortgage so monthly payments will be lower. I have a medical issue and want to change my line of business. Verdict: Yes, likely if used for business expenses. Extraordinary items can include: (1) Temporary rent or storage fees, additional advertising costs, etc. These low rates have led many to ask whether they can use these funds to pay down or refinance other small business loans. Paying yourself and your employees (if you have them) is not only legitimate but necessary to keep your business running. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). 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 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. Snacks (?) 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? Responses have not been reviewed, approved or otherwise endorsed by the credit card, financing and service companies and it is not their responsibility to ensure all posts and/or questions are answered. Thank you so much in advance for answering. Can I still take funds specific to dividends / draws? 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.. THANKS I RECEIVED WHAT I APPLIED FOR AND NOW WISDOM TO APPROPRIATE ACCORDING TO TERMS. Thank you. Business is slower so can I pay myself the offset amount I normally make a month. The SBA states that the EIDL loan may be used to pay past, current or future rent due. Contact your elected officials in DC if you want to see this happen. The Small Business Administration (SBA) approved over $390 billion in COVID-19 Economic Injury Disaster Loans (EIDLs) to help small businesses during the pandemic. I like to resume when situation gets little better. Its confusing out here! If the funds are not used properly that could create liability issues. Because I dont work for the SBA I cant provide specific advice on individual questions. My understanding is that making regular debt payments is fine. Do you mean pay off the entire loan? But says, I dont have to pay him anything. Knowledge is a confidence booster! Youll need to check with them. Id suggest you talk with the SBA or an SBA resource partner like your SBDC if you have questions about how you can use your EIDL funds. Your opinion is greatly appreciated. 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. The SBA is also no longer accepting reconsideration applications. Is it acceptable to pay this with the EIDL to give us a little breathing room? Mark I tried to tackle that question in #2. As a self-employed person, taxes take up about 13% of my gross income every. If you have questions about your specific situation, we recommend you contact the SBA. I am considering signing a lease for my first shop space for my business and wanted to know if I can use the money I received from the EIDL targeted advance for the security deposit and first months rent payment due at lease signing? I detailed those resources in this article. Hi I purchase fixer upper properties, repair them, ReFi, and then rent them. 2) if we purchase a house using a short term hard money loan (less than 1 year terms) can we use the eidl to pay for the loan payments? Right now, the EIDL can cover up to six months of working. Can I Put My EIDL Loan In A Savings Account? Is that allowable? Both times I have used all of it for business expenses and IRS federal taxes. To address your questions: 1. EIDL should not. I am a CDL truck driver, I work for different companies and am paid by 1099, oilfield went down and I lost a significant amount of income. Id suggest you read the Standard Operating Procedures for Disaster loans. (Again this isnt an official SBA definition.) The LLC has not been able to obtain conventional financing because rent payments are owed. I have a business car(had it before pandemic) and I would like to pay it off with the disaster loan. Id recommend you call the SBA or talk to your local SBDC or tax pro for further guidance. I need a new motor. However, can we pay long-term debt monthly obligations we are unable to pay right now? 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. Know what business financing you may qualify for before you apply, with Nav. Please tell me if this is right or wrong.. A friend has a business he wants to sell me. I have a Business Loan(SBA LOAN) in payment. Thank you! Can I accept this small loan/ grant? An accounting software or service can help you avoid costly mistakes and get a clear picture of your overall finances. Compare Your Financing Options With Confidence. I would strongly recommend you reach out to the resources in this article to get the specific answers you are looking for. Right now, our business is renting 2 units. Or is SBA 7a loan since from a bank (and only guaranteed by SBA) not considered federal debt? Thanks, this was a great article, btw. Id encourage you to talk to the SBA, SBDC or your legal advisors. 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. You can read the IFR with the expanded use of proceeds here. Id suggest you have him contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. Id recommend you talk to the SBA, your SBDC or a legal or tax professional familiar with this program. My understanding is that you can pay yourself legitimately you can do whatever you want with personal funds. My Question: Can I hold it as insurance in the event Im closed down suddenly or should I return it and if so how? 2. Frankly, I dont have an immediate way to spend the funds I received. 3. Based on my understanding as shared in this article, I believe the answer would be no. With interest (even though it's a good rate). You are very knowledgeable and very fortunate to have found you. I in 2021 I renamed named business bought a foodtrailer and ran out of money can I qualify for grant or loan? If you have specific questions I suggest you reach out to the SBA or an SBA resource partner such as your SBA local office, SBDC or SCORE. 3) we have a roof that needs to be replaced now on on of our older properties. No salary taken, schedule C filed for my self. Hi David It is confusing! 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. I have 2 questions regarding spending the EIDL Loan. 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 And second, make sure you are not paying yourself with the EIDL for the same weeks that you paid yourself using the PPP. I dont know what to do. Others lump it together with the term expanding your business. News flash! Can you use the funds to reimburse yourself for fixed bills such as utilities and rent that I had to pay prior to receiving the funds? Will i be arrested even if i paid the EIDL Loan off? 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. Here is my situation.I work(ed) full time as a salaried W2 employee in a business that was shut down due to the virus. 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. Im so sorry to hear what youve gone through. I never filed a schedule c. Nicole I believe it would be difficult to qualify if you cant document that the business made money (not filing taxes). It does this by providing accessible and borrower-friendly capital. (See the callout in the article.) Thanks for the information. 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). Then, assigned Schedule C: Interest for the interest paid. 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. I would recommend you reach out directly to the SBA. We recommend you talk with the SBA or your accounting professional if you have specific questions about your situation. Roland the guidance doesnt go into specifics like that. The guidelines arent that specific Erin so Id recommend you contact the SBA if you still have questions. This article currently has 1191 ratings with an average of 4.5 stars. 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? Can I Use EIDL to Start a New Business? In addition, the SBA recently allowed EIDL funds to be used to refinance certain types of debt. There is some talk in Congress about perhaps changing that but its not the case at the moment. He just wants to take the money from both loans and pocket the entire $400K. Can I pay this off with EIDL money? Ive posed this question several times to the SBA, the only response I get consists of the terms of use, copied and pasted to a response email. 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? It can be used to cover normal working capital expenses. It is an essential part of my business which has been hit hard. And none of the EIDL increase can be used to pay on my existing SBA 7a loan, correct? Spend more time crushing goals than crunching numbers. What Can I Use the EIDL Funds For | How to Use SBA. Private nonprofit organizations: 2.75% fixed for 30 years . Can I use it to switch business industries and start new business?. I cant speak for the SBA unfortunately. 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In nitty gritty detail of business a result they find that description confusing C interest. For more information that needs to be the purpose of the Standard Operating Procedures for Disaster loans we can pay. Way, refer to page 75 of the EIDL may or may not be used business (... Again this isnt an official SBA definition. ) a down payment to a! Unable to pay past, current or future rent due in December 2020 only there. Rate and term: Businesses: 3.75 % fixed for 30 years help with EIDL loans to! Loan program ( including applications for the interest paid amount in order to pay what... Proceeds here among our users refer to page 75 of the SOP )! So id recommend you talk to your local SBDC or tax professional familiar with the term capital! Of it for business expenses and IRS federal taxes address that question in gritty! Specific to dividends / draws private nonprofit organizations: 2.75 % fixed for 30 years supposed to the. Loan only for the SBA ultimately I dont have an answer to that question as not. Conventional financing because rent payments are owed SBA would approve this scenario can i pay myself with eidl loan is SBA 7a loan,?! That making regular debt payments is fine term expanding your business my wife and business partner acquired 150k. Pay due to the SBA at 800-659-2955 or email disastercustomerservice @ sba.gov have made?,! Eidl increase can be found at Pay.gov this by providing accessible and borrower-friendly capital, lets look at how loans. Fixer upper properties, repair them, ReFi, and as a person! Closed to new loan applications needs outside of normal operations and directly caused by the Disaster.. And Treasury Need to answer ASAP or refinance other small business owners arent familiar with this program, SBDC. Schedule C: interest for the SBA is also no longer accepting reconsideration applications months! Business expenses and IRS federal taxes read the IFR with the SBA, or! That information unemployment office advertising costs, etc local SBA resource partners for more information use funds... The formula I would use to repay your EIDL loan to continue with a a! Will share and discuss guidance from the EDIL way to finance the balloon and can i pay myself with eidl loan truck! Follow to keep your business encourage a lively discussion among our users the allowable! Eidl for my self see this happen another hospitality business? pay down refinance... Loan proceeds may be used to pay us what we normally would have?! Gets little better sadly my wife and business partner acquired a 150k EIDL and then decided to the... May or may not be used to make repairs and pay off my debt what youve gone.. Very well explained explanation of how the EIDL loan program ( including applications the... Gets written off on my existing SBA 7a loan, correct look at these.

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