Knowledge is a confidence booster! Verdict: Yes, likely if used for business expenses. They dont answer every question in nitty gritty detail. I thought the point of the loan was to help us stay afloat while dealing with this problem. I am the sole owner of a S Corporation. I had an accident that made me not able to walk for three months and cant drive for long hours like I use to do. And how long can I pay myself? I understand that it cant go to refinance, but can the loan bring down long term debt? Im sorry I am not following your question. Not a non-profit) You can also talk with your legal or financial advisors. Right now, the EIDL can cover up to six months of working. 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. 1. This article offers some suggestions for getting help with your EIDL loan. Fact: You can actually apply and be approved for BOTH of these programs. Extraordinary items can include: (1) Temporary rent or storage fees, additional advertising costs, etc. Additionally, could funds from the revenue account be invested as they are accounted for independently of all loan proceeds? We cant speak for them unfortunately. However, I dont work for the SBA and cant advise one way or the other. Businesses with fewer than 500 employees, certain nonprofits, and agricultural businesses can apply and be approved if they meet all criteria set by the SBA. (Later the SBA allowed self-employed borrowers to qualify based on gross revenue, instead of net profit.) Thank you. The best we can do is to try to provide information available from the SBA. Do these rule change apply retroactively to EIDL funds already received or approved? 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. It is in my name because my business did not have credit when I financed it. 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. Im a single member LLC and recently received an EIDL loan. 1. also here is the SBA Phone number 1-800-659-2955#1 for english #2 how the pandemic has effected my business. It seems clear you can't pay yourself unless it's for work you do in your business. For the first it sees reasonable but the guidelines dont get that specific and I just cant speak for the SBA. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. I got the private loan in Sept 2020 and it has a term of 12 months. Is there anyway I can return my EIDL loan money after accepting and signing the document of it? You can contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. 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. Ive only had money going out and no funds coming in. 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. The SOP that was posted recently dates back to May 2018. My take is that the Mastercard is just a payment method. Id recommend you reach out to your SBA District office to see if they can advise. This helps. ; (2) Accelerated debt due to the disaster; (3) Inventory replacement may be an extraordinary item. Great question. You may want to check with the SBA. Tesssa We cant speak for the SBA so we recommend you contact the SBA or an SBA resource partner if you have questions about your specific situation. For example I didnt receive my funds until June, but I applied in March. My understanding is that you could make the payments on a business vehicle but not pay it off as its long-term debt. 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. I havent seen anything in the guidance that addresses this question. If you received your loan after June 5, 2020, you apply based on the 24-week period. What will happen to any left over funds if not all used within that timeframe? 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. Can I use the EIDL funds to replace it? I have an EIDL question: There are a lot of these loans out there and it seems it will be difficult to audit all of them by the end of this year but I dont know what the process or procedures are for reviewing them. It states here in this article as well as the SBA SOP on page 75 as you stated here that funds can be used to pay IRS debt. Tenants didnt pay during pandemic and now funds needed to repair the units. Ehab, I addressed this question in the article in point #4. I am an ber driver. 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? But keep in mind the purposes of this loan. I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. The Standard Operating Procedures dont mention back pay. What Can I Use the EIDL Funds For | How to Use SBA. I just wasnt sure if it would conflict with the collateral as it is stated in the agreement. Loan or Grant: A COVID EIDL loan is a loan that must be repaid. , where these loans have been a popular topic of discussion. 1- NO DISBURSEMENT WILL BE MADE LATER THAN 6 MONTHS FROM THE DATE OF THIS 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. Can I use this money to buy parts on online and resell them on ebay? Can I use my EIDL loan to by materials for my business if I keep recipes. And none of the EIDL increase can be used to pay on my existing SBA 7a loan, correct? Hi Jeff I am hesitant to advise on specific situations as I dont work for the SBA. 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? However, I do not speak for the SBA so Id recommend you contact them or a resource partner. (Note: the SBA opened up EIDL to religious organizations impacted by coronavirus. He has an SBA loan for 150K payable in 10 years and just got another one for recently for 250K payable in 30 years. Id consult with them or your tax professional for specific advice. You must have your 10-digit loan number and a payment amount in order to pay it back. 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. Your accountant may be able to help. Can I used the EDIL to pay for training and certification? The LLC has not been able to obtain conventional financing because rent payments are owed. If those are normal bills your business pay then it seems they would fall under the category of normal operating expenses for the business. A February 2021 press release from the SBA statesthat EIDL funding is used to pay fixed debts, payroll and expenses, accounts payable and other bills that cant be paid because of the disasters impact.. I detailed those resources in this article. 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? 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? It seems as though it would be fine if that is normal compensation for services provided to the business. You're not alone, after doing some research I'll be answering that question in this video. It is a business vehicle not a credit card. 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. But I dont speak for the SBA. Will paying off debt be ok if that debt was incurred during Covid. Matt Id like to help but I dont work for the SBA and dont feel comfortable commenting in that level of detail. My payments are extremely high and I can not go on making that payment. Self-employed individuals can pay themselves with PPP funds, by claiming their owner compensation replacement. to help your business stay afloat as you wait to resume normal business functions. Great question but I dont know the answer. Based on what you are trying to do those expenses could be problematic. On the other hand, a reader who works from home wants to know if its acceptable to use EIDL to pay rent. Thank you! EIDL loans werent created just for the coronavirus economic crisis. other SBA loans). Thanks for your reply. It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations. 1) I received the EIDL loan in December 2020. 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. Not that Im aware of Saul. Example: My monthly revenue is 150k, and my (business only, not the new construction) expenses are 120k all going in and out from the same account. RE: Is There a Deadline to Spend EIDL Funds? Can I buy a place with it? Thanks, this was a great article, btw. For example, in the spring, a clothing store located in a disaster area is left with an inventory of winter clothing and has no funds to order summer stock. We are clearly accounting for the EDIL separately and only using those funds for approved items. Michael Ive tried to share guidance based on the Standard Operating Procedures (SOP) for Disaster Loans which you can read here. Ill note that many sole proprietors are paying themselves (usual compensation) with EIDL funds so it may make more sense to just pay that out of your personal funds. This article currently has 1191 ratings with an average of 4.5 stars. I havent seen that specific question addressed in guidance. Great article! For example, whats the formula I would use to pay myself? We received questions from entrepreneurs whose businesses were not likely to survive the pandemic downturn and wanted to know if they can use funds from one of these loans to start something new: I am an Uber driver and I got approved for an EIDL loan. Id recommend you check with your local SCORE or SBDC office they are helping small business owners for free. 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. I have a Business Loan(SBA LOAN) in payment. 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? 1) can the loan pay for rehab costs? And to refinance long-term debt I realize we cant do that. 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. License 60DBO-98588, Many business owners, including the sole proprietors and independent contractors who got these loans, have never used a government loan program like this before and are worried about the possible consequences of using their EIDL funds incorrectly. Id recommend you talk to the SBA, your SBDC or a tax professional familiar with EIDL. 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? But, I was able to keep my employees and grateful for that. 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.. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. He wants to sell me the business for 400K. So EIDL can be used to payoff SBA loans but cant be used to pay SBA Pre-payments? My business is a rental property that has been vacant for half the year after tenants left. 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