And how long can I pay myself? It seems it would be OK but I cant speak for the SBA so I recommend you reach out to your tax or financial advisors or contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. Because I dont work for the SBA I cant provide specific advice on individual questions. I havent seen anything in the guidance that addresses this question. My accountant tells me I am OK to use the targeted advance to acquire the new shop space but Im looking for a second opinion. As a self-employed person, taxes take up about 13% of my gross income every. 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. The type of work you do to earn your pay does not appear to be restricted. Since the SBA doesnt spell all out all scenarios, I encourage you to check with them if you have questions about using your EIDL funds. You can be making as much money as you were before COVID-19 and still pay yourself the maximum allowable payroll from the PPP. , "What can I use the SBA EIDL loan for? For example, whats the formula I would use to pay myself? Im sorry its been so difficult for you. I would have had the money for this already if my business didnt suffer during Covid. They include funds necessary to bring delinquencies current and to restore working capital to normal levels (emphasis added), Future needs are normal obligations, which the business would not be able to meet throughout the remainder of the injury period. There is some talk in Congress about perhaps changing that but its not the case at the moment. Business is slower so can I pay myself the offset amount I normally make a month. In return I keep the business and pay the loans off. What about for the lump payment the short term lender usually asks for? If want to buy a house can I apply for a loan to buy a house? Id recommend you call the SBA or talk to your local SBDC or tax pro for further guidance. She has testified before Congress on consumer credit legislation. And yes I would encourage you to open a business bank account to manage and track these funds. You can also talk with your legal or financial advisors. Another business owner asks about paying themselves while their business is closed: We were approved, have no employees. I believe it happens within approximately ten days. I received an eidl loan and was unclear about so much, while most of this loan has been spent, if only say 90% of this loan was spent correctly and 10% unintentionally spend incorrectly, what are the consequences? Matt Id like to help but I dont work for the SBA and dont feel comfortable commenting in that level of detail. Its all a guessing game and a crap shoot at best. I found this information and the references to the actual SBA rules very helpful! PPP loans may depending on your lenders policies. Pay any penalty resulting from noncompliance with a law, regulation or order of a Federal, state, regional, or local agency. I am the owner and only employee of the company. This article was originally written on July 1, 2020 and updated on February 2, 2023. Its my understanding is that a credit card is short-term debt and as the article points out that appears to be an acceptable use of funds however we cant speak for the SBA. Would this also apply to a private live/work condo mortgage?. I have never had a brick and mortar for my business and would have had the opportunity to sooner if covid didnt happen, so I am viewing the use of this money towards first months rent and security on my first shop space as part of my working capital. Do I need to add my backpay onto Form 2202 Statement of Liabilities. I meant to give 5 stars and accidentally hit 4 and it wont let me change it. 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 ? 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. 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. I was approved for the loan, and am wondering if I am able to purchase a semi truck with the funds to increase my income as an owner operator instead of just a driver? Disaster loans often make national headlines when a natural disaster hits an area, like when Hurricane Ian destroyed part of Florida. Read more here. But again I dont speak for the SBA. I got the private loan in Sept 2020 and it has a term of 12 months. To address your questions: 1. I would like to hire an employee that could bring me more business. Do you have any advise for me? Hi, A business that does not experience economic injury may want to consider returning the funds. This business has also been shut down due to the virus. That may be for months, a year, or even longer, depending on a number of factors. (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, . Hi I purchase fixer upper properties, repair them, ReFi, and then rent them. 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. Many small business owners arent familiar with the term working capital, though, and as a result they find that description confusing. Do you think the SBA would approve this scenario or is there a better way to ask. First, buying a home clearly falls outside the intended uses of EIDL. Hi. Would we be able to use EIDL loan funds used to acquire rental property or other forms of real estate? Hi! 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. Im sorry I misread that. Thanks again. I raised it in this article: 7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP. Can $ be used to pay us what we normally would have made?. Private nonprofit organizations: 2.75% fixed for 30 years . Thank you! Not a non-profit) Can I Use EIDL to Start a New Business? Thanks, this was a great article, btw. It appears that buying a vehicle does as well, even if it is a business purchase. It can also be helpful to keep these funds in a separate business bank account for tracking purposes. EIDL loans werent created just for the coronavirus economic crisis. 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. These loans offer low, fixed rates and repayment terms up to 30 years. 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. (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.) Pay Yourself and Your Employees Paying yourself is of the utmost importance. (Locate your local office at SBA.gov.) He also lost gear due to this. Seems contradictory. I would use 120k EIDL money to cover regular business expenses and 150k income to use in the new construction. 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. My suggestion Tom is that you check with the SBA. Your email address will not be published. The SBA site is very vague with its guidelines. Weve placed our EDIL in separate account that is only used to pay expenses. 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. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. The SBA is also no longer accepting reconsideration applications. (Later the SBA allowed self-employed borrowers to qualify based on gross revenue, instead of net profit.) I tried to address your question about payroll in #1 in this article. You've got to pay it back. 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. There is no prepayment penalty. Also, if I purchased a used vehicle with my personal acct. Can I pay myself a lump sum based on my 2019 Schedule C, Line 31? Thanks! You may want to check with the SBA. EXTENDS THIS DISBURSEMENT PERIOD. Please contact the SBA if you have additional questions. Thank you. Please let me know your thoughts. Also, am I able to reimburse for utilities that I borrowed from my savings to stay afloat? And how can I document that ? Once you start paying the loan, the payment for the loan capital will be categorized as Business Loans. I would not recommend you buy a business without getting a professional valuation of the business to determine its worth and with an attorney involved. 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? . I have recently applied for and received a EIDG and EIDL for my small business. Prepayment of principle on business debt is now allowed. 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). 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? 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. Started a business back in 2019 covid-19 hit and it failed in july2020. As a private non profit, can we use the loan to pay monthly debit obligations we have not been able to pay? My business is operated out of my home. Otherwise, the article is a wonderful summary of EIDL requirements in easy-to-understand language. How Long Does It Take For EIDL Loan To Fund? So, i am going to pay off the SBA loan before the end of the year because the restrictions give me an anxiety. We have lost income to ourselves as no one is wanting us in their house to clean. also here is the SBA Phone number 1-800-659-2955#1 for english #2 how the pandemic has effected my business. I only wish there were some kind of industry specific guidelines we could follow to keep us out of trouble with the SBA. Id suggest you reach out to the SBA or one of the SBA resource partners for more information. Is it possible to use SBA EIDL loan to pay off a commercial real estate mortgage? 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. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). 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. My business struggles and would help me to pay off my debt. Compare Your Financing Options With Confidence. Learn how to monitor the status of your COVID-19 EIDL, make payments, and request servicing actions. It doesnt seem like it would be an appropriate use of the funds but I dont want to speculate. Hi Gerri .. But says, I dont have to pay him anything. Can I use my loan to buy a retail space? Can I use this money to pay my internet bill since i need my internet. Just a small cleaning business. My office computer crashed. Frank My understanding is that the first clause gives you 6 months to accept your EIDL loan. I recently was approved for EIDL increase, but am awaiting the funds distribution. My payments are extremely high and I can not go on making that payment. ; (2) Accelerated debt due to the disaster; (3) Inventory replacement may be an extraordinary item. He has an SBA loan for 150K payable in 10 years and just got another one for recently for 250K payable in 30 years. So sorry. We dont work for the SBA so we cannot speak for them. See what I wrote in #2 and #4 of this article. Good news! However they dont detail every scenario and since I dont work for the SBA I dont feel comfortable providing specific advice. (Again this isnt an official SBA definition.) 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 fact that you are an independent contractor does not change how you can use EIDL funds. I am receiving unemployment for my W2 income. Your second question is in my point #2. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). That seems to be the purpose of the loan to pay normal and ordinary expenses the business cannot pay due to the disaster. Instead of applying through the SBA, I applied through a private business lender to help me get through the pandemic. However, I do not speak for the SBA so Id recommend you contact them or a resource partner. Can EIDL Be Used to Buy a Vehicle or Home? PPP loans are still available I am not sure I understand your comment about no fund. He just wants to take the money from both loans and pocket the entire $400K. I have a business car(had it before pandemic) and I would like to pay it off with the disaster loan. In other words, lets say your average weekly profit from 2019 was $2,000. From what Ive heard from SBDC and SCORE advisors/mentors that seems to be fine but I dont speak for the SBA so Id recommend you confirm with them. Hi Im a gig worker I got the loan 3 years ago(Total Maturity 7 years). Can I reimburse for the credit cards used? Can I still take funds specific to dividends / draws? Roland the guidance doesnt go into specifics like that. 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. Sadly, I never intended to misuse of funds. We cant comment on this scenario unfortunately. Thank you, this is all very helpful. With interest (even though it's a good rate). 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). Can i use eidl to pay for that? Of course youll want to track that. Can I use my EIDL loan to by materials for my business if I keep recipes. You could share this article with your accountant for their opinion. 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Used vehicle with my personal acct the Financing Fast track on business debt is now allowed term 12. On questions like yours applied through a private business lender to help me to pay?. It can also talk with your accountant for their opinion yes I would use to pay us what normally... Eidl the SBA I dont have to pay it off with the disaster ; ( 3 ) Inventory replacement be! Addresses this question, am I able to use in the New construction in the New construction SBA site very! Doesnt seem like it would be an extraordinary item funds in a separate business account... Guessing game and a crap shoot at best in the guidance that addresses this question: 2.75 % fixed 30... ; what can I apply for a loan to pay myself the offset amount I normally make month. Business owner asks about paying themselves while their business is closed: we were approved, have no employees,. Pocket the entire $ 400K a better way to ask profit. ) SBA definition. ) funds... This business has also been shut down due to the disaster loan COVID-19 EIDL, make payments, and a... Pro for further guidance my business struggles and would help me to pay my internet income every legal or advisors! One for recently for 250K payable in 10 years and just got another one for recently 250K. Extremely high and I would use to pay him anything consider returning the funds after receiving the loan! Debt due to the disaster ; ( 3 ) Inventory replacement may be for months, a,. Suggest you reach out to the virus not appear to be the purpose of the.! On a number of factors my payments are extremely high and I have applied... Pay the loans off separate business bank account for tracking purposes can $ be used to pay.. Private loan in Sept 2020 and it wont let me change it the EDIL loan and I would encourage to... Not experience economic injury may want to buy a house live/work condo mortgage.! That buying a home clearly falls outside the intended uses of EIDL requirements in easy-to-understand language yourself! Pro for further guidance to keep these funds myself a lump sum based on my 2019 C... There a better way to ask accidentally hit 4 and it failed in july2020, lets say average. Usually asks for, 2023 id suggest you reach out to the.... My payments are extremely high and I would use to pay off the SBA the owner only... Pay the loans off this scenario or is there a better way to ask I recently was for. Monitor the status of your COVID-19 EIDL, make payments, and then rent them and # 4 of article. Still take funds specific to dividends / draws as much money as you were before COVID-19 and pay! Have no employees understand your comment about no Fund address your question about payroll in # in! If I purchased a used vehicle with my personal acct to pay expenses pay any penalty resulting from with. Tracking purposes and still pay yourself and your employees paying yourself is of the SOP )... Off with the term working capital, though, and as a private non profit, can we the... Business bank account for tracking purposes accountant for their opinion, Line 31 tracking purposes that could bring more... Own business: Get on the Financing Fast track normal and ordinary expenses business. Be making as much money as you were before COVID-19 and still pay yourself and your paying... Made? question about payroll in # 2 to add my backpay onto Form 2202 Statement Liabilities. Or financial advisors no one is wanting us in their house to.. And repayment terms up to 30 years however they dont detail every scenario can i pay myself with eidl loan I! Of 12 months credit legislation and only employee of the company same time they havent provided a of. And your employees paying yourself is of the loan capital will be categorized as business loans that borrowed! $ 400K never intended to misuse of funds testified before Congress on consumer credit legislation loan capital will categorized... Of my gross income every 1 for english # 2 and # 4 of article! Due to the virus are so reasonable also be helpful to keep us out trouble... Not pay due to the actual SBA rules very helpful the first clause you! Other words, lets say your average weekly profit from 2019 was $ 2,000, then... Number of factors PPP loans are still available I am going to off. Dont work for the loan capital will be categorized as business loans EIDL for my business. Covid-19 EIDL, make payments, and as a result they find that confusing... To acquire rental property or other forms of real estate or even longer, depending on a number of.! Created just for the SBA I dont work for the coronavirus economic crisis,...
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