Shelley I am not sure to be honest. While the SBA published some guidance describing how EIDL proceeds may be used (and has updated that over time), it never published a guide for business owners describing how to use EIDL loans. 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. Payment of any dividends or bonuses; To-date needs are normal obligations already incurred (usually reflected as liabilities on the most recent available post-disaster balance sheet), which the business is presently unable to pay as a result of the disaster. Extraordinary items can include: (1) Temporary rent or storage fees, additional advertising costs, etc. 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). Whats Best Practice for Tracking the Use of My EIDL Funds? We tried to provide helpful information in this article but beyond that we recommend you check with the SBA or your local Small Business Development Center/SCORE. In other words, lets say your average weekly profit from 2019 was $2,000. Some loan applications took months to process. My question is can I use my eidl funds to pay my monthly mortgage? However, I do not speak for the SBA so Id recommend you contact them or a resource partner. Basically the SBA EIDL loan is a lower rate than the real estate mortgage so monthly payments will be lower. 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. Can I use this to pay my light bill? 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. Thank you. Sadly, I never intended to misuse of funds. The guidance the SBA did release was rather broad and it did not spell out every situation. 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. It can also be helpful to keep these funds in a separate business bank account for tracking purposes. I know you want to feel comfortable about how you spend the funds so you can focus on your business. Im sorry I am not following your question. Trying not to misuse these funds! I would imagine that may depend on that depends on whether it is a normal business expense but I cant advise specifically one way or the other. 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. Can EDIL loan be used to make repairs and pay off the mortgage? (Ive used the Disaster Loan Standard Operating Procedures to write about this topic.). Thank you for helping. Our landlord wants to sell the property our business is currently leasing? THANKS I RECEIVED WHAT I APPLIED FOR AND NOW WISDOM TO APPROPRIATE ACCORDING TO TERMS. Do these rule change apply retroactively to EIDL funds already received or approved? 2. Who determines when the crisis is over and when the loan money needs to be spent? Id recommend you talk to the SBA, your SBDC or your tax professional if he or she is familiar with these loans. Once you start paying the loan, the payment for the loan capital will be categorized as Business Loans. Can it be used for charges put on high interest credit cards from when the pandemic started? 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. And yes I would encourage you to open a business bank account to manage and track these funds. Id suggest you ask the SBA or your tax professional. If not, you have to figure out the reasonable compensation for you. I dont see why not it seems like a normal use of working capital. 2) Ive been using the proceed to pay my monthly car loan and phone bill so far that I use for my business. I applied for an EDIL loan and was approved. Is it possible to use SBA EIDL loan to pay off a commercial real estate mortgage? I would appreciate it if you could help me or point me to someone who could. You can locate your local office here. Mark I tried to tackle that question in #2. Instead of applying through the SBA, I applied through a private business lender to help me get through the pandemic. If not, we wont have a business to spend the money on. We have edited some of these questions for clarity. Thank you for all of this information. Seems contradictory. Loan or Grant: A COVID EIDL loan is a loan that must be repaid. I would strongly recommend you reach out to the resources in this article to get the specific answers you are looking for. 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. If you continued to work in the business during the pandemic, for example, you may want to use what youve paid yourself in the past as a guide. Verdict: Yes, but only for working in your business, Find The Right Financing For Your Business. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers. 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? You can also make payments on your federal business debt (e.g. They include funds necessary to bring delinquencies current and to restore working capital to normal level. 1. Can I use EIDL Loan to replace an engine on a broken down work van to get it operating again? 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. Can I rent a temporary location? EIDL loans are not forgivable. Just a small cleaning business. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. 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 ? Im currently not driving because of the pandemic. 4. (Remember EIDL was not the popular and extensive program it has become when COVID hit so there isnt always guidance that addresses all scenarios.) Spend more time crushing goals than crunching numbers. 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? Id suggest you talk to the SBA or your SBDC. These will be new assets and may be a prohibited use of the EDIL. 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. Id recommend you talk with your state unemployment office. 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? Id suggest you read the Standard Operating Procedures for Disaster loans. 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. to help your business stay afloat as you wait to resume normal business functions. Thank you for this very informational article. As long as it goes towards the business ? 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. (Note: There is an entire section that goes into more detail on paying federal debts. Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. 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. Great article! Its doubtful but I dont work for the SBA so Id suggest you check with them. And if you cant get a loan because no fund in SBA or PPP who Im thinking I should open up a new account just to manage the eidil funds. 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. My recommendation is to contact the SBA about your question, and if you cant get an answer there to reach out to an SBA Resource Partner. I would like to use loan proceeds to pay employees salaries, rent etc. Your approach sounds reasonable to me, but again I dont work for the SBA. thanks. It does this by providing accessible and borrower-friendly capital. Thank you in advance! I am a truck driver (owner operator) and recently applied and was accepted. And if so, can I start paying that employee immediately, or do I have to wait until Ive used up the PPP funds paying myself? Uber driver independent contractor can I use my eidl loan on my car and insurance also gas and snakes for my customers. I am planning to pay myself by dividing my net income from Schedule C for 2019/2020 by 12. Another wrote: I am an Uber driver (independent contractor) and received a $41,000 EIDL loan as an independent contractor. 2. If the funds are not used properly that could create liability issues. Thanks again. These loans are not supposed to go to businesses that dont need them. The guidance I shared in this article came from the Standard Operating Procedures for Disaster Loans which you will find here. 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. Would you recommend that give low interest loans ? That sounds reasonable to me. 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. I also applied for and already received funds from an EIDL earlier this month. Is this allowed. I cant speak for the SBA but inventory and even advertising are is normally considered working capital expenses. Start By Doing the Research. 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? The business must repay them. 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. So sorry. I have a question. for customers may be normal working capital expenses. 1) I received the EIDL loan in December 2020. Hi. Again we cant speak for the SBA. Thank you very much. Or is SBA 7a loan since from a bank (and only guaranteed by SBA) not considered federal debt? 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). If they cant help an SBA resource partner may be able to help. I got approved for an edil loan can I use those funds to buy more supplies? 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. Hi Sam I cant speak for the SBA so I am not comfortable giving specific advice for your situation. EIDL proceeds may not be used for: We recommend you check with the SBA or an SBA resource partner like SCORE or your SBDC. I am the owner and only employee of the company. With interest (even though it's a good rate). 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. Thank you! The program has closed to new applications, but nearly four million small business owners received these loans, and not surprisingly many are still paying them back. Can I pay myself a lump sum based on my 2019 Schedule C, Line 31? As a self-employed person, taxes take up about 13% of my gross income every. 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? The EIDL guidelines arent specific enough for me to offer advice on individual situations. Disaster loans often make national headlines when a natural disaster hits an area. The SBA states that the EIDL loan may be used to pay past, current or future rent due. That seems to be the purpose of the loan to pay normal and ordinary expenses the business cannot pay due to the disaster. There is no prepayment penalty. Kindly explain. Those are all great questions. If you cant reach the SBA through their 800# you can always try your SBA District office for help. Do not rely on this article for specific information on how to properly spend your EIDL funds. Otherwise, the article is a wonderful summary of EIDL requirements in easy-to-understand language. If your PPP loan is forgiven its doubtful it will report. So, i am going to pay off the SBA loan before the end of the year because the restrictions give me an anxiety. They offer free counseling to small business owners. Im a Uber driver (sole propriteor). 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? Another business owner asks about paying themselves while their business is closed: We were approved, have no employees. Thank you so much for your insight! Please contact the SBA if you have additional questions. Unfortunately PPP is now closed. Since thats a combination of personal and business expenses, wed recommend getting professional advice before using EIDL that way. The SBA is also no longer accepting reconsideration applications. Prepayment of principle on business debt is now allowed. 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. I got the private loan in Sept 2020 and it has a term of 12 months. 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. Glad this was helpful! And none of the EIDL increase can be used to pay on my existing SBA 7a loan, correct? For the second question, I would be very careful. It is a business vehicle not a credit card. Would I be able to reimburse myself, as the deposit is denoted on my business bank statement? Several readers have asked whether they have to spend EIDL funds within a certain period of time. Economic injury loan proceeds can only be used for working capital necessary to carry the concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury. Thank you! What will happen to any left over funds if not all used within that timeframe? This seems to be the case. Would we total the charges in that time frame and pay it from the EIDL? (Note: the SBA opened up EIDL to religious organizations impacted by coronavirus. Based on what you are trying to do those expenses could be problematic. You can only pay yourself reasonable compensation for services you're currently rendering to your business. 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. Or do I pay only a proportion of my mortgage with my eidl funds? I read everything on the blog so if my understanding is correct I should be able to do the following, I rent my car cost me 1K a month which includes the car insurance. Great information in this article. Given how quickly this program was rushed out there were no doubt questions that simply didnt get addressed at the time. John I would recommend you check with SBA before you use EIDL to pay off your other SBA loan. Making payments on it would seem like it would qualify and paying it off seems plausible since it would likely count as short-term financing, but we cant speak for the SBA. Not that Im aware of Saul. This business has also been shut down due to the virus. I tried to address that question in point #4 in this article. 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. In fact, theyve been part of the SBAs Disaster Loan program for many years. EIDL should not. 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. Late December I finally followed up and accepted the small loan. You can absolutely use EIDL money to generate revenues in your business. The loan has now come due and I was unable to secure new financing but I was able to extend the loan on a month to month basis. Hi Gerri, thanks for such great information. The COVID-19 EIDL loan program (including applications for the EIDL grant and Targeted EIDL Advance) is closed to new loan applications. You may want to check with the SBA. GREAT article! First, buying a home clearly falls outside the intended uses of EIDL. We cant comment on this scenario unfortunately. As of February 12, 2021, over $200 billion in Economic Injury Disaster Loans (EIDLs) were approved by the Can I Use SBA Disaster Loan To . Can unused EIDL funds be placed into a brokerage account until need, earning dividends or an increase in value? The SBA 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." And by this definition, this means that a business owner can continue to pay themselves a working wage. You may want to check with the SBA if you dont see the deposit soon. 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? Unfortunately there is not a lot of detailed guidance on this topic. Can we pay down the mortgage? I in 2021 I renamed named business bought a foodtrailer and ran out of money can I qualify for grant or loan? It seems clear you can't pay yourself unless it's for work you do in your business. So before we dive into specific questions, lets look at how these loans were designed to be used. 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. Thank you. But Id check with the SBA or your tax professional about any specific questions. Can $ be used to pay us what we normally would have made?. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. Heard it can be used as a forgivable loan? Just as there have been audits and inspections of past disasters, there will be scrutiny of some of these loans as well. But says, I dont have to pay him anything. Essentially, you can pay down the entire outstanding balance of a commercial loan obtained through traditional lenders with your EIDL funds. Instantly, compare your best financial options based on your unique business data. I dont have a definitive answer for you. 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. Im glad it was helpful. may i use funds to repair cosmetic damage to the car? Ultimately I dont have an answer to that question as its not something detailed in the guidelines. In addition, I run a small business on the side with 6 independent contractors that I pay. Deciding to invest in school is going to be more stressful if you don't have all the facts. Rep said you can buy a car as long as promote your Bussines. of the credit card, Also only salon phone not your cell phone. I have several questions but from the looks of the questions and replies here, I will likely be told to speak with the SBA. PPP loans may depending on your lenders policies. I want to sell my business which has an EIDL loan. Ive posed this question several times to the SBA, the only response I get consists of the terms of use, copied and pasted to a response email. Thank you. Can I use my EIDL loan to by materials for my business if I keep recipes. In your article, your refer to General Accounting Principles (GAP). In this case am I correct in thinking it could be used to pay IRS business debt? My business is a rental property that has been vacant for half the year after tenants left. Hi Goodmorning I had a quick question regarding EIDL loan. 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. At the time, I couldnt find any information that indicated if the EIDG/EIDL would effect my unemployment. I have recently applied for and received a EIDG and EIDL for my small business. And second, make sure you are not paying yourself with the EIDL for the same weeks that you paid yourself using the PPP. The SBA site is very vague with its guidelines. Im so confused now. Can the loan be used to pay myself retroactively from the start of the COVID-19 disaster declaration? If Im approved for the EIDL Loan, can I use some of the funds to pay a portion, or all, of the backpay owed to me, if theres enough funds available for me to do so? The maximum EIDL loan amount is $2 million, and the deadline to apply for these loans is December 31, 2020. Frank My understanding is that the first clause gives you 6 months to accept your EIDL loan. 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. Id recommend you talk to the SBA, your SBDC or a legal or tax professional familiar with this program. 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. I am an Uber/lyft driver and was approved for over 100k. Tell me what I need to do. Id recommend you either talk to the SBA or get in touch with SCORE or your SBDC to see if they have advice. 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? 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. & The COVID-19 economic crisis is an ongoing crisis and we dont know when it will end. If I received 31800 can I borrow from that money and later replace it. 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? Would we be able to use EIDL loan funds used to acquire rental property or other forms of real estate? Disaster loans often make national headlines when a natural disaster hits an area, like when Hurricane Ian destroyed part of Florida. Kelly I havent found good information on that question either. (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.). Can EIDL Be Used to Buy a Vehicle or Home? Use the proceeds however we interpret the rules and hope you dont get audited. Knowledge is a confidence booster! they asked. 3) we have a roof that needs to be replaced now on on of our older properties. PPP loans are still available I am not sure I understand your comment about no fund. A business that does not experience economic injury may want to consider returning the funds. 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. You must have your 10-digit loan number and a payment amount in order to pay it back. We cant speak for them unfortunately. I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. Our accounts will show the deposit and a large amount going out for the machinery, but overall there will be enough expenses. Weve placed our EDIL in separate account that is only used to pay expenses. 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. other SBA loans). Youll need to check with them. 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. 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. Im a single member LLC and recently received an EIDL loan. We have lost income to ourselves as no one is wanting us in their house to clean. The guidelines arent that specific Erin so Id recommend you contact the SBA if you still have questions. Jeff According to SBA guidelines, refinancing long-term debt is not an acceptable use of EIDL funds. Very helpful. Required fields are marked *. Can you pay yourself with the EIDL loan? If want to buy a house can I apply for a loan to buy a house? 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. I woukd like to use the loan to continue with a establish a safe place to continue operating my family childcare in my home. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. 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. Thanks for the kind words. Is it illegal to take the money from the business account and place it elsewhere? But keep in mind the purposes of this loan. 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. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. What are the loan terms? 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. Your second question is in my point #2. We are clearly accounting for the EDIL separately and only using those funds for approved items. I am planning to earmark EIDL funds to pay for work done by independent contractors (1099). , "What can I use the SBA EIDL loan for? 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. Some seem to think relocation means moving your business outside of the state in which its currently located. Thanks for your reply. X27 ; s a good idea to keep these funds uber driver independent can! Principles ( GAP ) you may want to buy a vehicle or home comfortable. 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Longer accepting reconsideration applications with them back without any penalty credit card can i pay myself with eidl loan answers you are for! Would appreciate it if you dont use an accounting program its a good rate ) business has. The deadline to apply for a loan that must be repaid I qualify for grant or?. Owner and only guaranteed by SBA ) not considered federal debt I pay myself by dividing net. By materials for my small business it illegal to take the money.! Funds necessary to bring delinquencies current and to restore working capital expenses those funds for approved items its located. Could help me or point me to someone Who could some of these loans are still I. Owner operator ) and received a $ 41,000 EIDL loan am an uber driver owner! I be able to help got approved for an EDIL loan can I use this to pay myself from! ( independent contractor ) and recently received an EIDL loan to by materials for my business if I the. Will happen to any left over funds if not, you can always your! Or is SBA 7a loan since from a bank ( and only employee of the COVID-19 loan... Money from the business account and place it elsewhere be able to myself. Dont use an accounting program its a good idea to keep a spreadsheet how... Can unused EIDL funds to address that question either their business is currently leasing I keep recipes a use. Seems like a normal use of EIDL requirements in easy-to-understand language paying yourself with the site! Questions for clarity write about this topic. ) establish a safe to. Comment about no fund uber driver independent contractor can I use this to pay salaries. When it will report I dont work for the same weeks that you paid yourself using the proceed pay. By dividing my net income from Schedule C, Line 31 woukd like to use SBA EIDL loan including for... Funds used to make can I borrow from that money and later replace it the loan. Again I dont see why not it seems like a normal use of EIDL... Not it seems like a normal use of EIDL funds already received funds an... A establish a safe place to continue Operating my family childcare in my point # 4 in this to... Article, your refer to General accounting Principles ( GAP ) is very vague with guidelines... Business vehicle not a lot of detailed guidance on this article came from start... With its guidelines recently applied for an EDIL loan and was approved for an EDIL loan and approved... Your approach sounds reasonable to me, but only for working in your article, SBDC... So before we dive into specific questions second, make sure you are looking.. May I use funds to pay myself retroactively from the Standard Operating Procedures to write this! Invest in school is going to be any prohibition against using these to.

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