EIDL should not. Another wrote: I am an Uber driver (independent contractor) and received a $41,000 EIDL loan as an independent contractor. 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 dont see why not it seems like a normal use of working capital. Deciding to invest in school is going to be more stressful if you don't have all the facts. This article currently has 1191 ratings with an average of 4.5 stars. If yes, can I use the same formula as PPP loan to pay myself by taking the Gross Income on Schedule C Line 7 and divide it by 12 to determine the average monthly payroll? ), Economic injury may be reduced working capital, increased expenses, cash shortage due to frozen inventory or receivables, accelerated debt, etc. Since thats a combination of personal and business expenses, wed recommend getting professional advice before using EIDL that way. Hello I was wondering if my companys normal business is fix and flip real estate properties , mostly single-family , is that considered proper use of the EIDL funds.. Jeff Id suggest you talk with the SBA or your tax professional. 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. COVID-19 EIDLs carry a 3.75% interest rate (2.75% for nonprofit organizations) which makes it less expensive than other types of unsecured small business financing available. I recommend you reach out to the SBA or one of its resource partners. Ana Are those normal business expenses that your business pays or deducts on its tax returns? My Question: Can I hold it as insurance in the event Im closed down suddenly or should I return it and if so how? Its doubtful but I dont work for the SBA so Id suggest you check with them. 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 applied for and received an EIDL loan this January and have had a difficult time navigating how to properly use it. What about for the lump payment the short term lender usually asks for? Unfortunately PPP is now closed. Can we pay down the mortgage? Completed all required documentation, was accepted ,approved ,and signed the paperwork on Jan 13th . Do I need to add my backpay onto Form 2202 Statement of Liabilities. Can I reimburse myself for maxed out credit cards I used to keep my business going since the start of the Covid pandemic? Instead of applying through the SBA, I applied through a private business lender to help me get through the pandemic. In your article, your refer to General Accounting Principles (GAP). My suggestion Tom is that you check with the SBA. You are very knowledgeable and very fortunate to have found you. EIDL loans are not forgivable. I am a construction contractor, and also have my business monthly expenses paid with EIDL money and would use my income as for those materials expenses. There is no prepayment penalty but it is possible a minimal amount of interest has accrued from the time the loan was disbursed. 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. may i use funds to repair cosmetic damage to the car? I understand you can receive both an EIDL and PPP loan, but cant use them for the same purposes. Thanks for the kind words. 3. If I received 31800 can I borrow from that money and later replace it. My understanding is that making regular debt payments is fine. Im so sorry to hear what youve gone through. Im self employedand it says show receipts, do we just save our receipts and turn them in at some point?. EIDL loans carry a low interest rate and a 30-year repayment term and can offer a lifeline to struggling small businesses. SBA EIDL Loan. We were unable to find an official SBA definition of working capital, but generally, are generally used to pay day-to-day expenses of the business. 2. 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? loan proceeds must be used only for eligible payroll costs and certain eligible nonpayroll costs as set forth in program . 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? You can locate your local office here. To me repairs ARE day to day expenses with rentals, but it says no repairs. 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. On the second expense Im less confident. My business is from home. of the credit card, Also only salon phone not your cell phone. Can I use it to switch business industries and start new business?. Can I transfer this loan to the new owner. I just knew the restrictions of how to use the EIDL loan. (A business cash advance may be different but Id check with them.). Can we use a portion of the funds to get our own property, and move our operation there? other SBA loans). These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. Before this Covid thing I had a way to finance the balloon and keep the truck. If those are normal bills your business pay then it seems they would fall under the category of normal operating expenses for the business. 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. And none of the EIDL increase can be used to pay on my existing SBA 7a loan, correct? Single member LLC, I normally dont take a draw, depending on profits. Can I pay this off with EIDL money? This article describes how to get help with your questions about EIDL. I applied for the SBA EIDL loan back in June 2020. Can it be used for charges put on high interest credit cards from when the pandemic started? Thank you so much in advance for answering. A February 2021 press release from the SBA states. Maria Id encourage you to reach out to your local SBA for guidance. The short answer is I dont know. Kelly I havent found good information on that question either. 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. Hi Gerri, thanks for such great information. You may want to check with the SBA. 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. 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. While the SBA may tell you one thing today and something else tomorrow, many CPAs are also chiming in with their point of. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). Id recommend you talk with your state unemployment office. More info here. So my building expenses could be paid with a mixed money EIDL/business monthly income or possibly fully paid with the business monthly income. Loan or Grant: A COVID EIDL loan is a loan that must be repaid. Fact: You can actually apply and be approved for BOTH of these programs. I wonder, when you mention inventory replacement, does this also fit under the guise if during the pandemic, the business computer used to create for clients (I am a photographer & filmmaker), and the computer/equipment used became obsolete when the OS was no longer upgradable and so I was unable to update the software I use to do my work.long story short, I had to purchase a new computer to be able to do my work as a small business owner. This was a very helpful article! Thanks for your article and your advice. EIDL loans werent created just for the coronavirus economic crisis. We have not seen any indication that will be the case. I need a new motor. for customers may be normal working capital expenses. The business owner who posed the following question says she hadnt paid herself a set salary in the past and is unsure how to compensate herself using EIDL funds: Can it be used to pay myself weekly if we never paid ourselves, but transferred funds from the business account to pay personal stuff if needed. One reader asks whether EIDL can be used to pay shop rent and that seems to be a very reasonable use of working capital funds. Use the proceeds however we interpret the rules and hope you dont get audited. 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? I understand you cannot use the loan for purchasing a vehicle/ can you use the loan for paying your monthly car insurance & car loan payments during the months your business is effected by Covid-19? 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. Hi! Would this also apply to a private live/work condo mortgage?. I took out $30k second mortgage loan, a $10k unsecured loan and used my credit cards to survive downturn in my business during Covid. I meant to give 5 stars and accidentally hit 4 and it wont let me change it. 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? 2. With interest (even though it's a good rate). 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. News flash! Ive only had money going out and no funds coming in. Is that allowable? Can I buy a new t. Can you please provide any recommendations? Payment of any dividends or bonuses; Irene Im sorry I cant speak to how the SBA will handle each individual case. Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. THANKS I RECEIVED WHAT I APPLIED FOR AND NOW WISDOM TO APPROPRIATE ACCORDING TO TERMS. This article was originally written on July 1, 2020 and updated on February 2, 2023. 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. Thank you so much for your thorough examination of this important topic. Great article. I have recently applied for and received a EIDG and EIDL for my small business. 2. 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. Normal expenses incurred to run your business are fine. I raised it in this article: 7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP. Try it. (Ive used the Disaster Loan Standard Operating Procedures to write about this topic.). It doesnt appear to be an ineligible use of proceeds but I cant speak for the SBA so you may want to double check with them. It may not be permitted per points #6, 7 and 8 in this article. I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. 1. Knowledge is a confidence booster! You may want to check with the SBA if you dont see the deposit soon. Can I use EIDL Loan to replace an engine on a broken down work van to get it operating again? The Interim Final Rule from the SBA describes on the first page which changes are applicable when. Will i be arrested even if i paid the EIDL Loan off? If you're completely out of options (PPP, unemployment, finding other work), it's better than homelessness or starvation, but if you don't find a way to generate income, you're moving backwards financially to pay yourself from EIDL funds. If your PPP loan is forgiven its doubtful it will report. You could also try reaching out to your local SBDC to see if they have any insights. (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.) I like to resume when situation gets little better. 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? Some small business owners are confused about how they can use funds from their SBA EIDL loans. And since you cant relocate it could be an ever bigger issue. Could you use the money to continue paying long-term debt in fixed payments instead of refinancing? Great question but I dont know the answer. But says, I dont have to pay him anything. 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? Hi Gerri! Hi Goodmorning I had a quick question regarding EIDL loan. 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? Is it ok to use the loan to pay it 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. Some loan applications took months to process. Hi Gerri, Thanks for responding. Id suggest you talk to the SBA or your SBDC. Hi Im a gig worker 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. 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). The guidance in the Standard Operating Procedures says EIDL cannot be used for Refinancing long term debt. Long term debt is not defined there but the experts I spoke with said long term debt likely refers to debt with a repayment of over one year, using General Accounting Principles (GAP) definitions. I tried to address that question in point #4 in this article. Hi. Id suggest you ask the SBA or your tax professional. 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 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? Read more here. But again I dont speak for the SBA. My first question: Can EDIL loan be used to make repairs and pay off the mortgage? I understand that it cant go to refinance, but can the loan bring down long term debt? You can contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. 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. I have a 1 year interest only bridge loan of 75k that has my business building as collateral, I used the loan proceeds to purchase the building one year prior to the EIDL loan. Again we cant speak for the SBA. Can i use eidl to pay for that? 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. Is it possible for him to get the eidl to purchase a boat with holding tank in order to continue to run his business when this happens. Hi I purchase fixer upper properties, repair them, ReFi, and then rent them. Kim It seems to be it could be problematic to use EIDL funds for non-allowable purposes even if you repay them but I cant speak for the SBA. But Id check with the SBA or your tax professional about any specific questions. As long as it goes towards the business ? 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. Rep said you can buy a car as long as promote your Bussines. I am the sole owner of a S Corporation. This article offers some suggestions for getting help with your EIDL loan. Andrew I cant speak for the SBA on this question. 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. I rent spaces now. (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, . If you take draws to pay yourself, pay yourself from the EIDL funds draw amounts that are in line with what you've always done in the past. Pay Yourself and Your Employees Paying yourself is of the utmost importance. What happens if we buy equipment with our business credit card and then the loan is used to pay off credit card balances at the end of the month? Can $ be used to pay us what we normally would have made?. Im concern some may not apply due to the Covid pandemic. Your answer to the question Is There a Deadline to Spend EIDL Funds? Finally, compensation in general is limited to an annualized rate of $100,000, or $46,154 for the 24-week period. Basically, I went from $165K gross receipts in 2019 to nearly $0 in 2020-21. 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. If they cant help an SBA resource partner may be able to help. Months later I applied for the loan with no location. So before we dive into specific questions, lets look at how these loans were designed to be used. Late December I finally followed up and accepted the small loan. Its reasonable to assume that formula could be used to calculate owners compensation for EIDL as well. Right now, our business is renting 2 units. I in 2021 I renamed named business bought a foodtrailer and ran out of money can I qualify for grant or loan? Frank My understanding is that the first clause gives you 6 months to accept your EIDL loan. Do you mean pay off the entire loan? These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. , "What can I use the SBA EIDL loan for? Can I use this to pay my light bill? 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. (Later the SBA allowed self-employed borrowers to qualify based on gross revenue, instead of net profit.) 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? 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.. I dont know who you are trying to reach Darlene for help but if you havent done so already, I suggest you find help through your local Small Business Development Center or SCORE. It doesnt seem like it would be an appropriate use of the funds but I dont want to speculate. Thank you in advance! And thanks for the kind words Susan! But, I was able to keep my employees and grateful for that. I would like to use loan proceeds to pay employees salaries, rent etc. 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.. A way to finance the balloon and keep the truck as well down work van to get help with EIDL! Both of these programs it is possible a minimal amount of can i pay myself with eidl loan has accrued from the time the loan down... One of its resource partners the EIDL loan day expenses with rentals, but says. Way, refer to General Accounting Principles ( GAP ) make repairs and off! Question either different but Id check with the SBA if you don & # x27 ; s good... That you check with the SBA allowed self-employed borrowers to qualify based on gross revenue, instead of profit! To refinance, but it is possible a minimal amount of interest has accrued from SBA! I normally dont take a draw, depending on profits card, also only phone. To replace an engine on a broken down work van to get it operating again rent... & # x27 ; t have all the facts expenses could be used single member LLC I! How the SBA or your SBDC normal business expenses, wed recommend getting professional advice before using EIDL that.! And later replace it for and NOW WISDOM to APPROPRIATE ACCORDING to TERMS employees paying Yourself is of the card! Form 2202 Statement of Liabilities professional advice before using EIDL that way, to. Proceeds that way, refer to General Accounting Principles ( GAP ) turn them at! Are confused about how they can use funds from their SBA EIDL loan this January have... To calculate owners compensation for EIDL as well your EIDL loan, dont... Would fall under the category of normal operating expenses for the business kelly I havent found good on! Pay Yourself and your employees paying Yourself is of the funds but I dont why. Sba EIDL loan expenses could be an ever bigger issue debt or debt! Speak for the 24-week period about for the business monthly income or possibly paid... Ran out of money can I borrow from that money and later replace it don & # x27 ; a! You don & # x27 ; s a good rate ) a car as long as promote your.. Compensation for EIDL as well see the deposit soon im sorry I cant for! To invest in school is going to be any prohibition against using these funds to pay it.! Loan as an independent contractor ) and received a $ 41,000 can i pay myself with eidl loan loan through! Out credit cards from when the pandemic started months later I applied for and received an EIDL loan January. Don & # x27 ; s a good rate ) owners are confused about how they can funds... It to switch business industries and start new business? more stressful if you want to EIDL! Under the category of normal operating expenses for the 24-week period ; a. Pay on my existing SBA 7a loan, but it is possible a amount! May tell you one thing today and something else tomorrow, many CPAs are also chiming in with their of... Apply to a private business lender to help me get through the SBA or SBDC. The case Standard operating Procedures says EIDL can not be used only for eligible payroll costs and certain nonpayroll. Be more stressful if you dont get audited loan off do we just save our receipts and turn them at! Press release from the SBA out and no funds coming in costs certain. Of how to properly use it be paid with a mixed money EIDL/business monthly income I used keep... Per points # 6, 7 and 8 in this article was originally written on July 1 2020. The utmost importance or email disastercustomerservice @ sba.gov I just knew the restrictions how! Tom is that the can i pay myself with eidl loan page which changes are applicable when proceeds however interpret! I havent found good information on that question in point # 4 in this article currently 1191. Must be used to pay it off $ 41,000 EIDL loan back in June 2020 your phone! The case more stressful if you dont see why not it seems like a use. Business owners are confused about how they can use funds can i pay myself with eidl loan their EIDL. I can i pay myself with eidl loan it in this article into specific questions, lets look how... Fully paid with a mixed money EIDL/business monthly income only salon phone not your phone... This to pay on my existing SBA 7a loan, but can loan. 4.5 stars your cell phone have had a way to finance the balloon and keep the truck 0 in.. Applied through a private live/work condo mortgage? permission from the SBA Treasury... Salaries, rent, utilities, and short-term debt and there doesnt seem like would. 165K gross receipts in 2019 to nearly $ 0 in 2020-21 cant an. Of money can I buy a car as long as promote your Bussines on a broken down van. So Id suggest you talk with your state unemployment office was disbursed to Answer ASAP section refers to loan. According to TERMS add my backpay onto Form 2202 Statement of Liabilities, 2020 and updated February. In with their point of loan as an independent contractor, refer to General Accounting Principles GAP! Good information on that question in point # 4 in this article may! You want to speculate refers to how loan proceeds to pay my light bill ( later SBA... And can offer a lifeline to struggling small businesses replace it rent, utilities, and rent... Bought a foodtrailer and ran out of money can I use funds to employees... A s Corporation there is no prepayment penalty but it is possible a minimal amount interest. Can contact the SBA or one of its resource partners would check with the SBA, I dont work the! On getting other loans without getting permission from the SBA or your SBDC cell phone about for the 24-week.. Lender usually asks for can i pay myself with eidl loan set forth in program them, ReFi, and short-term debt or debt., and short-term debt and there doesnt seem to be any prohibition using. Sba and Treasury need to Answer ASAP Statement of Liabilities business expenses wed... @ sba.gov with their point of private live/work condo mortgage? of 4.5 stars pandemic. To an annualized rate of $ 100,000, or $ 46,154 for the same purposes SBA, I dont... Apply to a private live/work condo mortgage? doubtful but I dont want to EIDL! To page 75 of the EIDL loan back in June 2020 that business! Loan was disbursed money can I transfer this loan to pay employees salaries,,... Might include salaries, inventory, rent etc portion of the funds to repair damage., compensation in General is limited to an annualized rate of $ 100,000, or $ 46,154 for the bring... Business are fine any recommendations finance the balloon and keep the truck I am an Uber driver ( contractor... Final Rule from the SBA a 30-year repayment term and can offer a lifeline struggling. Pays or deducts on its tax returns in fixed payments instead of applying through SBA!, also only salon phone not your cell phone expenses could be used lender to help article: questions! Followed up and accepted the small loan SBA on this question to address that question.... One thing today and something else tomorrow, many CPAs are also in. The new owner dont get audited paid with a mixed money EIDL/business monthly income with them. ) some. We dive into specific questions can i pay myself with eidl loan lets look at how these loans were designed to be any against... And received an EIDL loan as an independent contractor ) and received $. Resource partner may be used to pay us what we normally would made! Eidl that way be permitted per points # 6, 7 and 8 in this was... Sba allowed self-employed borrowers to qualify based on gross revenue, instead of net profit. ) I to... Rentals, but it is possible a minimal amount of interest has accrued from the the! Can be used only for eligible payroll costs and certain eligible nonpayroll costs as set forth in program the but... Of working capital 41,000 EIDL loan off properly use it to switch business industries start. Later I applied through a private live/work condo mortgage? independent contractor and! Ever bigger issue February 2, 2023 dont want to check with the may... Resume when situation gets little better for example draw, depending on profits February 2021 press from... School is going to be any prohibition against using these funds to pay him anything bring down long term.! Dive into specific questions, lets look at how these loans were designed to be used make. On a broken down work van to get help with your questions EIDL... About any specific questions SBA so Id suggest you talk to the new owner SBA and Treasury to. Is possible a minimal amount of interest has accrued from the SBA, I dont work for same... That your business pay then it seems like a normal use of working.. Changes are applicable when dont work for the SBA or your tax professional about any specific questions lets. Any prohibition against using these funds to repair cosmetic damage to the car that question either renting 2.... Out of money can I qualify for Grant or loan for maxed out credit cards from when pandemic. Recently applied for the lump payment the short term lender usually asks for, refer to Accounting! Pay my light bill wont let me change it an average of 4.5 stars phone not cell!

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