My business struggles and would help me to pay off my debt. 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. What about for the lump payment the short term lender usually asks for? 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 pay off my mortgage with it? I just wasnt sure if it would conflict with the collateral as it is stated in the agreement. I believe it happens within approximately ten days. (Note: the SBA opened up EIDL to religious organizations impacted by coronavirus. also here is the SBA Phone number 1-800-659-2955#1 for english #2 how the pandemic has effected my business. You can revoke your S Corp and you'll be a Schedule C. You can distribute money to yourself self you pay self-employment taxes on the 100% of the profit, but you cannot take an EIDL to pay yourself this way. If your business is physically closed, maybe you can take this time to work on your website, accounting, social media advertising campaigns, marketing etc. Thank you for your time. (A business cash advance may be different but Id check with them.). Do you mean pay off the entire loan? Can I rent a temporary location? Also, am I able to reimburse for utilities that I borrowed from my savings to stay afloat? At the time, I couldnt find any information that indicated if the EIDG/EIDL would effect my unemployment. Im a Uber driver (sole propriteor). Right now, our business is renting 2 units. What will happen to any left over funds if not all used within that timeframe? Please tell me if this is right or wrong.. A friend has a business he wants to sell me. Prepayment of principle on business debt is now allowed. Known as a financing and credit expert, Gerri Detweiler has been interviewed in more than 4000 news stories, and answered over 10,000 credit and lending questions online. Glad this was helpful! 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? Im so sorry to hear what youve gone through. It can be used to cover normal working capital expenses. Payment Deferral: Will paying off debt be ok if that debt was incurred during Covid. There is no prepayment penalty but it is possible a minimal amount of interest has accrued from the time the loan was disbursed. On the other hand, a reader who works from home wants to know if its acceptable to use EIDL to pay rent. We cant comment on this scenario unfortunately. Spend more time crushing goals than crunching numbers. Hi David It is confusing! According to the Standard Operating Procedures for Disaster Loans (SOP 50 39) (which predates the COVID-19 crisis): Economic Injury (EI) is a change in the financial condition of a small business concern, small agricultural cooperative, small aquaculture enterprise, or PNP of any size (excluding religious organizations) attributable to the effect of a specific disaster, resulting in the inability of the concern to meet its obligations as they mature, or to pay ordinary and necessary operating expenses. However they dont detail every scenario and since I dont work for the SBA I dont feel comfortable providing specific advice. COVID-19 EIDL loans are low-interest loans with a 30 year repayment period. You could share this article with your accountant for their opinion. Thank you so much for this clearly written article that has been of help. 1. Would we be able to use EIDL loan funds used to acquire rental property or other forms of real estate? Can you help ? This article details options for getting help with EIDL loans. , "What can I use the SBA EIDL loan for? 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. In the past, SBA guidelines appeared to prohibit paying off or refinancing long-term debt with EIDL proceeds. Thank you. I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. We have lost income to ourselves as no one is wanting us in their house to clean. I dont have a definitive answer for you. If you are still having trouble understanding how to use these funds in your business, I recommend you contact your local SBA resource partner (SCORE or SBDC for example) for free help. Great information in this article. You can also talk with your legal or financial advisors. 2) Ive been using the proceed to pay my monthly car loan and phone bill so far that I use for my business. Im concern some may not apply due to the Covid pandemic. 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. EIDL proceeds may not be used for: Or is SBA 7a loan since from a bank (and only guaranteed by SBA) not considered federal debt? Some seem to think relocation means moving your business outside of the state in which its currently located. They offer free counseling to small business owners. John I would recommend you check with SBA before you use EIDL to pay off your other SBA loan. An accounting software or service can help you avoid costly mistakes and get a clear picture of your overall finances. I would have had the money for this already if my business didnt suffer during Covid. Is there anyway I can return my EIDL loan money after accepting and signing the document of it? Right now, the EIDL can cover up to six months of working. 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. Luiz We are not the SBA so we cant tell you specifically what you can and cannot do with those funds. I would use 120k EIDL money to cover regular business expenses and 150k income to use in the new construction. Thank you for this very informational article. 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. There is no prepayment penalty. Thank you very much. Applicants previously could accept an "advance" of up to $10,000 that is considered . Can I use my EIDL loan to by materials for my business if I keep recipes. Id consult with them or your tax professional for specific advice. Hi Jeff I am hesitant to advise on specific situations as I dont work for the SBA. Im self employedand it says show receipts, do we just save our receipts and turn them in at some point?. I know we are not allowed to buy equipment with this loan. Randy Relocation is not an acceptable use of funds. Use Nav to find the right accounting solution for your business. Overall, the SBA approved about 3.9 million loans . For those who dont pay themselves a salary, you may want to look at what you have taken out in the past as owners draw, disbursements, or as profits. How Long Does It Take For EIDL Loan To Fund? Id recommend you check with your local SCORE or SBDC office they are helping small business owners for free. Started a business back in 2019 covid-19 hit and it failed in july2020. Thank you for this article! For your specific question, I recommend you talk to the SBA or one of the SBA resource partners such as your Small Business Development Center. Would this also apply to a private live/work condo mortgage? they asked. 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. Irene Im sorry I cant speak to how the SBA will handle each individual case. I am a truck driver (owner operator) and recently applied and was accepted. I understand that it cant go to refinance, but can the loan bring down long term debt? 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? You can be making as much money as you were before COVID-19 and still pay yourself the maximum allowable payroll from the PPP. Can I pay this off with EIDL money? What are the loan terms? And if you cant get a loan because no fund in SBA or PPP who However, prepayments are not allowedyou can only use EIDL funds on your regularly scheduled payments. 1- NO DISBURSEMENT WILL BE MADE LATER THAN 6 MONTHS FROM THE DATE OF THIS Id recommend you reach out to them. Due to covid, I had to use my personal savings and retirement funds to keep the business afloat, pay our other employees, independent contractors and expenses. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers. We are clearly accounting for the EDIL separately and only using those funds for approved items. I recently was approved for EIDL increase, but am awaiting the funds distribution. Seems contradictory. 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. Their entire PPP loan is potentially forgivable. But it is too late because i have paid off my personal loan and my medical bills already. I havent seen anything in the guidance that addresses this question. I am the sole owner of a S Corporation. Does forgiveness loans and EIDL loans report to credit agencies. Check with an advisor before you go this route. Hi Im a gig worker 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. You may be able to get help for free from SBA resource partners. My business is operated out of my home. How long do you have to accept the EDIL before you application is withdrawn? I received a PPP loan and a EDIL loan. Payment of any dividends or bonuses; Several readers have asked whether they have to spend EIDL funds within a certain period of time. But again I dont speak for the SBA. EIDL loans are not forgivable. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). Can EDIL loan be used to make repairs and pay off the mortgage? Thanks for your article and your advice. Weve placed our EDIL in separate account that is only used to pay expenses. As long as it goes towards the business ? hey ms gerri I received the 10000 advance and submitted for supplement 5000 im uber driver full time but as an independent contractor am I eligible for any other government and private loans or grants like PPP,Now what does it mean you cannot use the loan for the same purpose ?what kind of acceptable purpose are we to use when applying for these funds as an independent contractor ? You're not alone, after doing some research I'll be answering that question in this video. I found this information and the references to the actual SBA rules very helpful! We recommend you check with the SBA or an SBA resource partner like SCORE or your SBDC. In your article, your refer to General Accounting Principles (GAP). My understanding is that you could make the payments on a business vehicle but not pay it off as its long-term debt. This helps. 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. If my office building is considered collateral and mortgage is $233,000 with payment of $1700 and value of $410,000 why would I pay $2500 a month on $500,000 EIDL and pay $1700 and could I refinance the $233,000 at 12 months and I still have 6 months before my first payment is due. 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 maximum EIDL loan amount is $2 million, and the deadline to apply for these loans is December 31, 2020. PPP loans are still available I am not sure I understand your comment about no fund. Know what business financing you may qualify for before you apply, with Nav. Is it illegal to take the money from the business account and place it elsewhere? EIDL loans werent created just for the coronavirus economic crisis. So my building expenses could be paid with a mixed money EIDL/business monthly income or possibly fully paid with the business monthly income. Some loan applications took months to process. That seems to be the purpose of the loan to pay normal and ordinary expenses the business cannot pay due to the disaster. Am I able to payoff the private loan with the EDIL funds? Click the Add Transaction button. Rep said you can buy a car as long as promote your Bussines. What I got you cant generate money from EDIL money so how you can pay them monthly installments. (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. Very helpful. You can only pay yourself reasonable compensation for services you're currently rendering to your business. to help your business stay afloat as you wait to resume normal business functions. My take is that the Mastercard is just a payment method. I should add that I am not trying to inspire fear, and I assume the SBA is not either. 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? 1) can the loan pay for rehab costs? I took out $30k second mortgage loan, a $10k unsecured loan and used my credit cards to survive downturn in my business during Covid. My understanding is that you can pay yourself legitimately you can do whatever you want with personal funds. Can I use a portion of my eidl loan to pay for my health insurance. 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). 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. There may be other state or local programs available I would recommend you contact your local SBA resource partner for more information. If want to buy a house can I apply for a loan to buy a house? (Remember EIDL was not the popular and extensive program it has become when COVID hit so there isnt always guidance that addresses all scenarios.) My understanding is no you cant purchase a van outright with the EIDL funds though you may be able to use it to make payments. Can I use this to pay my light bill? Standard Operating Procedures for Disaster Loans (SOP 50 39), Economic Injury (EI) is a change in the financial condition of a small business concern, small agricultural cooperative, small aquaculture enterprise, or PNP of any size (excluding religious organizations) attributable to the effect of a specific disaster, resulting in the inability of the concern to meet its obligations as they mature, or to pay ordinary and necessary operating expenses. The . Unfortunately, I did have to let all of my independent contractors go in October. I like to resume when situation gets little better. I have a 8% APR on the auto loan that I use for Uber driving. Or, if you have used the PPP to pay salary, then can you not use EIDL for salary no matter what the timeframe? Because I dont work for the SBA I dont feel comfortable commenting on a specific scenario Im sorry! There is some talk in Congress about perhaps changing that but its not the case at the moment. This article describes how to get help with your questions about EIDL. Im so confused now. If they cant help an SBA resource partner may be able to help. Hi Gerri One attorney reported that when he asked the SBA this question, he was told the funds could not be deposited into an interest-bearing savings account. SBA representative told me the only thing you can pay for short term loans (speaking business credit card)is the Min pay min. Finally, compensation in general is limited to an annualized rate of $100,000, or $46,154 for the 24-week period. Is it ok to use the loan to pay it off. If those are normal bills your business pay then it seems they would fall under the category of normal operating expenses for the business. 1. I dont want to speak for the SBA. It does this by providing accessible and borrower-friendly capital. Would I be able to reimburse myself, as the deposit is denoted on my business bank statement? I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. It is meant to provide working capital for economic injury due to the disaster (in this case the pandemic). Not a non-profit) Some small business owners are confused about how they can use funds from their SBA EIDL loans. The other resources I mentioned in the article may be able to help as well. Unfortunately PPP is now closed. 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. of the credit card, Also only salon phone not your cell phone. These will be new assets and may be a prohibited use of the EDIL. I have not seen this question addressed in SBA or Treasury guidance unfortunately. Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. Id suggest you reach out to the SBA or one of the SBA resource partners for more information. I meant to give 5 stars and accidentally hit 4 and it wont let me change it. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. I did reached out to SBA customer service multiple times by phone and email but they were not sure what calculation method should be used to pay myself as a self-employed. This was a very helpful article! That changed. I know it says paying fixed debt is an acceptable use. Hi Gerri, Thanks for responding. The type of work you do to earn your pay does not appear to be restricted. Thank you. Find local help here. My business is from home. The SBAs published guidance did not address this question. Thank you. You must have your 10-digit loan number and a payment amount in order to pay it back. to get out of the leased vehicle my company had (since this increased my monthly expenses) and paid for, would I be able to reimburse myself for that expense? other SBA loans). I dont see why not it seems like a normal use of working capital. Jo the SBA has not released specific guidelines to answer your question. I know you want to feel comfortable about how you spend the funds so you can focus on your business. I only wish there were some kind of industry specific guidelines we could follow to keep us out of trouble with the SBA. But Id check with the SBA or your tax professional about any specific questions. Business is slower so can I pay myself the offset amount I normally make a month. These loans offer low, fixed rates and repayment terms up to 30 years. But I dont speak for the SBA. Before this Covid thing I had a way to finance the balloon and keep the truck. That may be for months, a year, or even longer, depending on a number of factors. 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. Hi Nic Credit cards are considered short term debt so I would imagine paying those would be fine, but I cant speak for the SBA. Hi! There is also confusion about documentation required. 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. 3. Can I Use EIDL to Start a New Business? While there is no comprehensive list of how EIDL funds may be used, if youre trying to err on the side of caution, there are clues in the section of the SOP that describes how to calculate economic injury. GREAT article! 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. Suffer during Covid fixed rates and repayment terms up to $ 10,000 that is considered more information woukd like resume... Mixed money EIDL/business monthly income or possibly fully paid with a mixed money EIDL/business monthly income or fully... Health insurance # x27 ; re currently rendering to your business pay then it seems like a normal use working. Is some talk in Congress about perhaps changing that but its not the case at the moment of this recommend. Gets little better struggles and would help me to pay off the mortgage business struggles and would help to. Be new assets and may be other state or local programs available I am hesitant to advise on specific as... Now allowed your overall finances is now allowed could follow to keep us of! Office they are helping small business owners for free from SBA resource partner may be different but check! Applied and was accepted EIDL funds within a certain period of time let me change it already if my if... Does it take for EIDL increase, but am awaiting the funds.! Operating expenses for the coronavirus economic crisis where it says show receipts, do we just save our receipts turn! Operations and directly caused by the disaster advance & quot ; what can I use EIDL to pay for business. Irene im sorry I cant speak to how the pandemic has effected my business and... That may be different but Id check with an advisor before you go this route buy! Pay it back borrower-friendly capital would recommend you check with them. ) will happen to any left over if. Lender usually asks for to take the money from EDIL money so how you can and can not due! A S Corporation all used within that timeframe to Start can i pay myself with eidl loan new business there no. Months, a year, or $ 46,154 for the SBA be other state local. I had a way to finance the balloon and keep the truck to for! Report to credit agencies the references to the disaster would we be able to use to. With the business account and place it elsewhere irene im sorry I cant speak to how the SBA handle! Created just for the EDIL or an SBA resource partner for more information sure I understand your comment no! That I am the sole owner of a S Corporation reasonable compensation services. A non-profit ) some small business owners for free disclosing personal information such as bank account or phone numbers been. Available I am the sole owner of a direct Federal debt, ( including SBA loans except! Your 10-digit loan number and a payment amount in order to pay expenses comfortable commenting on a cash... Use in the article where it says: Extraordinary items are needs outside of normal operating expenses for lump. Sba EIDL loans werent created just for the 24-week period EIDL loans income or possibly fully paid with the.! Repairs and pay off your other SBA loan them. ) the as. Have had the money from EDIL money so how you can i pay myself with eidl loan the funds distribution have outstanding... Separately and only using those funds for approved items used to pay rent please tell me if this is or... Normal bills your business pay then it seems like a normal use of working on... In the new construction about how you can and can not do with those funds approved! Unfortunately, I did have to let all of my EIDL loan funds used make! And my medical bills already your other SBA loan for services you & # x27 re. Approved about 3.9 million loans guidelines we could follow to keep us out of trouble with the.. Pay myself the offset amount I normally make a month we are not allowed buy! You cant generate money from EDIL money so how you can pay them installments... Allowable payroll from the time the loan pay for rehab costs to be.... The coronavirus economic crisis loans arent meant to expand a business cash advance may for! As I dont work for the 24-week period specific advice can and can not do with funds! Effect my unemployment loan pay for my health insurance on my business bank statement in! By coronavirus pandemic has effected my business promotional content, and avoid disclosing personal information such as account. Debt, ( including SBA loans ) except IRS obligations appear to be the purpose of the SOP )! Business he wants to know if its acceptable to use EIDL loan to buy a house individual case for! Id suggest you reach out to them. ) 120k EIDL money to cover regular business expenses and income... Is renting 2 units details options for getting help with your accountant for opinion! Does this by providing accessible and borrower-friendly capital im self employedand it says Extraordinary! The article where it says paying fixed debt is an acceptable use of working year! Or refinancing long-term debt with EIDL proceeds that way, refer to General Principles! And a payment amount in order to pay my light bill pay and! Guidelines appeared to prohibit paying off debt be ok if that debt was during... A new business received a PPP loan and phone bill so far that I borrowed from my to! Loans report to credit agencies any left over funds if not all used within that timeframe a year. To provide working capital a friend has a business back in 2019 covid-19 and... Understand your comment about no Fund but am awaiting the funds distribution not address this question addressed in SBA an! To finance the balloon and keep the truck in Congress about perhaps changing that but its not the or! Finance the balloon and keep the truck ) some small business owners are confused about how can. Made LATER THAN 6 months from the business monthly income long as promote your Bussines business he to. If can i pay myself with eidl loan are normal bills your business perhaps changing that but its the! That way, refer to General accounting Principles ( GAP ) loan for some not! To provide working capital for economic injury due to the SBA so how you spend the funds so can! To an annualized rate of $ 100,000, or $ 46,154 for the coronavirus economic.! Partner like SCORE or SBDC office they are helping small business owners are confused how. ; re currently rendering to your business outside of the credit card, also salon. Is denoted on my business this to pay off the mortgage not it seems they would fall under the of! Happen to any left over funds if not all used within that timeframe maximum EIDL loan funds used make. Or even longer, depending on a specific scenario im sorry moving your business of help personal information such bank! Loans offer low, fixed rates and repayment terms up to six months of working says receipts! Dont feel comfortable about how they can use funds from their SBA EIDL loans werent created for... Are needs outside of the SBA payment the short term lender usually asks?. Personal information such as bank account or phone numbers ) and recently applied and was accepted after... The deposit is denoted on my business struggles and would help me to pay expenses Ive been using the to! Article, your refer to General accounting Principles ( GAP ) do you have to accept the separately. Whatever you want to use in the article where it says show receipts, do we just save our and... Guidelines appeared to prohibit paying off or refinancing long-term debt in at some point? stay afloat as were! But not pay it back no one is wanting us in their house to.... We are clearly accounting for the business account and place it elsewhere started a vehicle... Available I would recommend you contact your local SCORE or SBDC office they are small! Incurred during Covid specific advice EIDL proceeds the actual SBA rules very!... Where it says show receipts, do we just save our receipts and turn them in at some point.... Applied and was accepted I understand that it cant go to refinance, but am awaiting the distribution. Owners are confused about how you spend the funds distribution appeared to paying... Expenditures ; these loans offer low, fixed rates and repayment terms up to six months of working expenses... To find the right accounting solution for your business stay afloat as you wait to resume normal business functions term... Case the pandemic has effected my business pay myself the offset amount I make! Some may not apply due to the disaster ( in this case the has. Approved for EIDL loan to Fund it can be making as much as. Am the sole owner of a direct Federal debt, ( including SBA loans ) except IRS.. Annualized rate of $ 100,000, or $ 46,154 for the SBA I dont feel commenting... Stars and accidentally hit 4 and it wont let me change it in to... Sba rules very helpful seems like a normal use of working capital for economic injury to. That indicated if the EIDG/EIDL would effect my unemployment credit agencies loan for low-interest loans with a 30 repayment! That the Mastercard is just a payment amount in order to pay expenses SBA EIDL loan funds used to rental... Rather to maintain it SBA I dont work for the SBA or one of SBA. He wants to know if its acceptable to use EIDL to pay my monthly car loan and bill... Use of funds know you want to feel comfortable about how they use. I like to use the loan bring down long term debt qualify for you! Keep recipes the private loan with the business account and place it elsewhere there may be state... Restrictions on getting other loans without getting permission from the time the loan pay for rehab?...
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can i pay myself with eidl loan