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? If not, we wont have a business to spend the money on. Compare Your Financing Options With Confidence. 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). Marcus I would recommend you speak to the SBA. I tried to address your question about payroll in #1 in this article. if after receiving The EDIL loan and i have leftover money how can i keep the leftover money because the rates are so reasonable. We cant advise you specifically though it seems that generally that car payments, insurance and gas would be normal working capital expenses for an Uber driver. 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.. If youre paying yourself for services actually rendered it would seem to be legitimate use but I dont have insight into your specific question. Good Aft I applied for an EDIL loan and was approved. 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." Paying yourself and your employees (if you have them) is not only legitimate but necessary to keep your business running. I only wish there were some kind of industry specific guidelines we could follow to keep us out of trouble with the SBA. Thank you. 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. , "What can I use the SBA EIDL loan for? (Note: There is an entire section that goes into more detail on paying federal debts. Can I buy a place with it? EIDL loans werent created just for the coronavirus economic crisis. 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. 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? I cant speak for the SBA but inventory and even advertising are is normally considered working capital expenses. Jo the SBA has not released specific guidelines to answer your question. Its all a guessing game and a crap shoot at best. She has testified before Congress on consumer credit legislation. If you have questions about how to use your EIDL funds I recommend contacting the SBA or one of its resource partners. 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? 2) I did receive an EIDL loan, I can prove 100% of the loan was applied toward my business, do I have to repay this loan? Hi, My business is from home. If you cant reach the SBA through their 800# you can always try your SBA District office for help. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant; Repayment of stockholder/principal loans, except when the funds were injected on an interim basis as a result of the disaster and non-repayment would cause undue hardship to the stockholder/principal; Expansion of facilities or acquisition of fixed assets; Repair or replacement of physical damages; Refinancing long term debt (SBA later made an exception here; see that change described below)). I would strongly recommend you reach out to the resources in this article to get the specific answers you are looking for. Unfortunately PPP is now closed. Please let me know your thoughts. Can I pay myself with SBA EIDL loan? Hi Rich You can read the guidelines for yourself starting on page 75 of the Standard Operating Procedures for Disaster Loans. Not that Im aware of Saul. There is some talk in Congress about perhaps changing that but its not the case at the moment. Id recommend you either talk to the SBA or get in touch with SCORE or your SBDC to see if they have advice. On the second expense Im less confident. Can I still take funds specific to dividends / draws? 2. 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. Can you use the PPP to pay salary for the covered period, and the EIDL to pay salary AFTER that period? (Keep in mind you should only use EIDL funds for business purposes, such as paying off business credit cards, and not to pay off personal credit card debt.). It appears that buying a vehicle does as well, even if it is a business purchase. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. If you really want to understand these loans, you have to look at the history of this program. Since thats a combination of personal and business expenses, wed recommend getting professional advice before using EIDL that way. I have applied for an EIDL Loan. I have a 8% APR on the auto loan that I use for Uber driving. Earlier, we pointed out that the guidelines for these loans prohibit funds from being used for expansion of facilities or acquisition of fixed assets. Based on that language, it does not appear you can use these funds to invest in real estate. In your article, your refer to General Accounting Principles (GAP). 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. Because I dont work for the SBA I cant provide specific advice on individual questions. Will i be arrested even if i paid the EIDL Loan off? Im a business with a payroll of one and lot of expenses (100% payables w/recievables of less than 10%) (Had alot of volunteers with the business. My lease on my truck is coming to an end and I have a balloon payment. But we cant speak for the SBA so please feel free to reach out to them for any questions about acceptable use of your funds. EIDL funds can also be used to pay yourself for work you've done to benefit your business; however, paying yourself is forbidden. ; (2) Accelerated debt due to the disaster; (3) Inventory replacement may be an extraordinary item. You may be able to get help for free from SBA resource partners. You can be making as much money as you were before COVID-19 and still pay yourself the maximum allowable payroll from the PPP. I would like to hire an employee that could bring me more business. If they cant help an SBA resource partner may be able to help. I got the private loan in Sept 2020 and it has a term of 12 months. Like most things in life, a bit of planning can help to take some of the stress out of big school decisionsincluding the financial ones.**. In addition, I run a small business on the side with 6 independent contractors that I pay. Applicants previously could accept an "advance" of up to $10,000 that is considered . Is there a legal way to place the funds in a retirement account? Hi Gerri, Thanks for responding. It does this by providing accessible and borrower-friendly capital. 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. So I understand that I cant buy a new home with a EIDL loan, but what if you have land (paid off) and I want to build a spec home to sell it would that be ok? 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. 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. Given how quickly this program was rushed out there were no doubt questions that simply didnt get addressed at the time. Youll see the guidelines starting on page 75. Weve placed our EDIL in separate account that is only used to pay expenses. Because I dont work for the SBA I dont feel comfortable commenting on a specific scenario Im sorry! The PPP was designed to continue your 2019 payroll for a period . The SBA announced September 8, 2021 that it expanded the allowable use of funds to include paying most debts, specifically: SBA is revising the regulation at 13 CFR 123.303, How can my business spend my economic injury disaster loan?, to permit COVID EIDL working capital loan proceeds to be used to pay any type of business debt, including loans owned by a Federal agency (including SBA) or an SBIC. How Much Can I Pay Myself and Qualify for Forgiveness? It appears that is the case but I dont work for the SBA so please double check with them if you have any questions about how to use your EIDL funds. However, she wont respond to my questions of what she is planning to do with the money. Can I reimburse myself for maxed out credit cards I used to keep my business going since the start of the Covid pandemic? Can I use a portion of my eidl loan to pay for my health insurance. 3. Can I reimburse for the credit cards used? Alternatively you can ask your SBA resource partner (SBDC or SCORE mentor). To help differentiate the funds from the rest of your expenses, the SBA recommends keeping the EIDL money in a separate account. Great information in this article. But I dont speak for the SBA. 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. Can i used the sba loan for buy two car for my business like uber or taxi? Once you start paying the loan, the payment for the loan capital will be categorized as Business Loans. Could the loan be used to pay say, a year in advance, on a piece of equipment? 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. Can I use my loan to buy a retail space? And second, make sure you are not paying yourself with the EIDL for the same weeks that you paid yourself using the PPP. Thank you for your time to help and answer all of us. Luiz We are not the SBA so we cant tell you specifically what you can and cannot do with those funds. It can be used to cover normal working capital expenses. 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? I just wasnt sure if it would conflict with the collateral as it is stated in the agreement. also here is the SBA Phone number 1-800-659-2955#1 for english #2 how the pandemic has effected my business. 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. With interest (even though it's a good rate). It doesnt seem like it would be an appropriate use of the funds but I dont want to speculate. I am an Uber/lyft driver and was approved for over 100k. May I payoff the principal of my loan with EIDL loan? Or you can reach out to the SBA if youre not sure how you can use your loan proceeds. Unfortunately there is not a lot of detailed guidance on this topic. Instead of applying through the SBA, I applied through a private business lender to help me get through the pandemic. Can I use the EIDL funds to replace it? 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. Presumably this disaster will affect different businesses for different periods of time. 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. Your local SBDC or SCORE would be a great resource for that information. This article currently has 1191 ratings with an average of 4.5 stars. Pay any penalty resulting from noncompliance with a law, regulation or order of a Federal, state, regional, or local agency. Im thinking I should open up a new account just to manage the eidil funds. For example I didnt receive my funds until June, but I applied in March. All may help for free. Self-employed individuals can pay themselves with PPP funds, by claiming their owner compensation replacement. U am an UBER driver an I recieved my loan. Can I pay myself a lump sum based on my 2019 Schedule C, Line 31? I received an EIDL fund of less than $200,000.00 for the hotel lease business & now because we can not pay that lease because of a very very low sale, we return that hotel. Id suggest checking with your tax professional. Payment Deferral: Hi Gerri .. Please contact the SBA if you have additional questions. Spending those funds on a different business could be problematic. 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. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers. 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. I have a work cargo van that I use for my business. I got the loan 3 years ago(Total Maturity 7 years). Thank you so much in advance for answering. 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. 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