Disaster loans often make national headlines when a natural disaster hits an area. a reasonable use of these funds. Our interest rate is higher than 3.75%, and isnt amortized for 30 years. 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 ? Thank you. I understand that it cant go to refinance, but can the loan bring down long term debt? Jo the SBA has not released specific guidelines to answer your question. 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." I am an independent contractor and all of my business dried up with the pandemic. Since thats a combination of personal and business expenses, wed recommend getting professional advice before using EIDL that way. 2. Id recommend you reach out to your SBA District office to see if they can advise. 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? Find local help here. 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. 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. Use the proceeds however we interpret the rules and hope you dont get audited. I have recently applied for and received a EIDG and EIDL for my small business. 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. 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. Weve placed our EDIL in separate account that is only used to pay expenses. And if you cant get a loan because no fund in SBA or PPP who This article describes how to get help with your questions about EIDL. If not, you have to figure out the reasonable compensation for you. Please help us keep our site clean and protect yourself. 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. 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. I would have had the money for this already if my business didnt suffer during Covid. We recommend you talk with the SBA or your accounting professional if you have specific questions about your situation. 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. 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? Id suggest checking with your tax professional. As long as it goes towards the business ? Thank you for your time to help and answer all of us. The only long term debt with the office is the SBA loan and all other debt is operating expenses and for some reason if I needed to pay back the SBA loan I would just sell the office building because in a few years it will be worth $500,000 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 . Before this Covid thing I had a way to finance the balloon and keep the truck. Can I use my loan to buy a retail space? How Long Does It Take For EIDL Loan To Fund? I meant to give 5 stars and accidentally hit 4 and it wont let me change it. It seems like a plausible use of funds. But Id check with the SBA or your tax professional about any specific questions. Thanks again. 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? My Question: Can I hold it as insurance in the event Im closed down suddenly or should I return it and if so how? This was a very helpful article! But, I was able to keep my employees and grateful for that. Im a uber driver and switching to Courier business can I use the money to pay for a cargo van that is needed which the main equipment used. Hi Im a gig worker 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. But keep in mind the purposes of this loan. Id recommend you either talk to the SBA or get in touch with SCORE or your SBDC to see if they have advice. And an EIDL loan for self-employed people may be used to cover the following, regardless of whether it's for the self-employed person or for employees: Wages, commissions, income, or net earnings (capped at $100,000 per employee) Employee benefits (costs for vacation, family, or sick leave) Insurance premiums Retirement benefits Id consult with them or your tax professional for specific advice. Ann, Unfortunately the SBA guidance doesnt specifically address every situation and we cant speak for the SBA. If your business is physically closed, maybe you can take this time to work on your website, accounting, social media advertising campaigns, marketing etc. (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, . What about for the lump payment the short term lender usually asks for? Again we cant speak for the SBA. Although their work was directly responsible for new revenue, can I still label payments from my company to them as coming from the EIDL money? I dont have a definitive answer for you. 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. Im thinking I should open up a new account just to manage the eidil funds. We'd love to hear from you and encourage a lively discussion among our users. 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. Tenants didnt pay during pandemic and now funds needed to repair the units. I cant speak for the SBA though so if you need specific guidance, Id encourage you to contact them. As a private non profit, can we use the loan to pay monthly debit obligations we have not been able to pay? 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. I woukd like to use the loan to continue with a establish a safe place to continue operating my family childcare in my home. 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). Can I pay this off with EIDL money? Sadly my wife and business partner acquired a 150k EIDL and then decided to move the funds into a separate account. Although it saves you money Im not sure whether it would be acceptable per the discussion in the article. Beyond that Ill have to suggest you talk to the SBA with any specific questions. Single member LLC, I normally dont take a draw, depending on profits. But I would recommend you reach out to someone at the SBA or a resource partner (SBDC or SCORE) to find out. 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. My understanding is that you could make the payments on a business vehicle but not pay it off as its long-term debt. It can be used to cover normal working capital expenses. Paying down $300K of the mortgage will be really helpful for our long-term bottom-line. Check with the SBA. Please contact the SBA if you have additional questions. You've been approved and you're wondering. I also applied for and already received funds from an EIDL earlier this month. Click the Add Transaction button. I am receiving unemployment for my W2 income. Hi Rich You can read the guidelines for yourself starting on page 75 of the Standard Operating Procedures for Disaster Loans. Can I Put My EIDL Loan In A Savings Account? COVID-19 EIDL loans are low-interest loans with a 30 year repayment period. Disaster loans often make national headlines when a natural disaster hits an area, like when Hurricane Ian destroyed part of Florida. Can I buy a place with it? If your PPP loan is forgiven its doubtful it will report. Greg, As I stated in the article the SBA says: If those are normal bills your business pay then it seems they would fall under the category of normal operating expenses for the business. Also, if I purchased a used vehicle with my personal acct. 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. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). Hi Jeff I am hesitant to advise on specific situations as I dont work for the SBA. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). The SBA states that the EIDL loan may be used to pay past, current or future rent due. 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? As a sole proprietor Ive looked high and low trying to find expert advice on how I can use the EIDL for my small trucking company. In other words, lets say your average weekly profit from 2019 was $2,000. Thanks. Can I use my EIDL loan to by materials for my business if I keep recipes. 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. I still am not clear if I can accept an Economic Injury loan/grant and collect unemployment as well. Great article. However they dont detail every scenario and since I dont work for the SBA I dont feel comfortable providing specific advice. It is an essential part of my business which has been hit hard. There may be other state or local programs available I would recommend you contact your local SBA resource partner for more information. 1. Whats Best Practice for Tracking the Use of My EIDL Funds? And none of the EIDL increase can be used to pay on my existing SBA 7a loan, correct? 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? 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. I am the only employee and payroll myself a salary. We are clearly accounting for the EDIL separately and only using those funds for approved items. (Again this isnt an official SBA definition.) Im concern some may not apply due to the Covid pandemic. However, I do not speak for the SBA so Id recommend you contact them or a resource partner. Can I use the EIDL funds to replace it? Pay Yourself and Your Employees Paying yourself is of the utmost importance. I used this loan only for the business, not personal. Will i be arrested even if i paid the EIDL Loan off? In fact, theyve been part of the SBAs Disaster Loan program for many years. 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. Basically, I went from $165K gross receipts in 2019 to nearly $0 in 2020-21. You can always check with them. The COVID-19 EIDL loan program (including applications for the EIDL grant and Targeted EIDL Advance) is closed to new loan applications. Im a single member LLC and recently received an EIDL loan. Hi! Thank you. Uber driver independent contractor can I use my eidl loan on my car and insurance also gas and snakes for my customers. Is this allowed. Several readers have asked whether they have to spend EIDL funds within a certain period of time. Is it safe to assume and use the same calculation method as PPP loan by taking the Gross Income on line 7 of Schedule C and divide that by 12 to get the monthly payout amount? Some small business owners are confused about how they can use funds from their SBA EIDL loans. As a self-employed person, taxes take up about 13% of my gross income every. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. I havent published guidance from the SBA that goes into that level of detailed advice. And thanks for the kind words Susan! If you use accounting software, you can put a note EIDL on those expenditures and keep a file or attach receipts. Id encourage you to talk to the SBA, SBDC or your legal advisors. Hello. Just a small cleaning business. That sounds reasonable to me. 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. You've got to pay it back. I have a 8% APR on the auto loan that I use for Uber driving. I am curious, we use a Mastercard to pay for all of our monthly business expenses which we pay off each month. Id recommend you talk with your state unemployment office. With interest (even though it's a good rate). Marcus I would recommend you speak to the SBA. , "What can I use the SBA EIDL loan for? Thank you for all your valuable info and keeping this up to date. 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. I havent seen that specific question addressed in guidance. The EIDL is a low-interest, long-term loan for small business owners that have been impacted by COVID. Hi Goodmorning I had a quick question regarding EIDL loan. Please tell me if this is right or wrong.. A friend has a business he wants to sell me. Paycheck Protection Program. Hi i am rideshare driver and i have my car loan from td bank which i used for rideshare business only can i paid off that loan using sba eidl loan or not ? Since the SBA doesnt spell all out all scenarios, I encourage you to check with them if you have questions about using your EIDL funds. 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? 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? I am finally able to rent court time again to give lessons but it now appears they may close again any day due to the recent surge in new cases/hospitalizations in my county. Your email address will not be published. Youll see in the article that the SBA updated guidelines to allow for the prepayment of most debt. Can you use the funds to reimburse yourself for fixed bills such as utilities and rent that I had to pay prior to receiving the funds? Your second question is in my point #2. This article was originally written on July 1, 2020 and updated on February 2, 2023. (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. Verdict: Yes, likely if used for business expenses. Those seem like normal working capital expenses that would typically be allowable but I cant speak for the SBA. 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. 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. We dont work for the SBA so we cannot speak for them. You must have your 10-digit loan number and a payment amount in order to pay it back. Based on my understanding as shared in this article, I believe the answer would be no. Unfortunately there is not a lot of detailed guidance on this topic. to help your business stay afloat as you wait to resume normal business functions. Does forgiveness loans and EIDL loans report to credit agencies. 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. Hi! Loans terms include a 1% interest rate, a five-year maturity period and a six-month payment deferral. The SBA is also no longer accepting reconsideration applications. I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. The . I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. Is it true that I wasnt supposed to use the funds to payoff any federal debt? I would recommend you reach out directly to the SBA. 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? The guidelines for EIDL generally can be found in this document. Ehab, I addressed this question in the article in point #4. I in 2021 I renamed named business bought a foodtrailer and ran out of money can I qualify for grant or loan? My business is from home. I only wish there were some kind of industry specific guidelines we could follow to keep us out of trouble with the SBA. If the funds are used for rent, May the other, separate entity (LLC) that owns the building and the mortgage, use the rent payments to pay down its SBA 7a mortgage even though the C-corp is a guarantor on, but not a borrower , the 7a loan? Unfortunately PPP is now closed. Roland the guidance doesnt go into specifics like that. 1. Krissy It doesnt sound the the use of funds this program is intended for but the guidelines are not specific enough for me to advise one way or the other. Your employees paying yourself is of the SOP. ) period of time I addressed question! Local programs available I would recommend you contact your local SBA resource partner for more information loan program for years... Readers have asked whether they have to figure out the reasonable compensation you. Contact your local SBA resource partner for more information payoff any Federal debt, ( including applications for SBA... A friend has a business he wants to sell me funds to in. For more information I cant speak for them # 2 your valuable info and keeping up. Not personal comfortable providing specific advice Goodmorning I had a way to finance the balloon and keep the.. Ann, Unfortunately the SBA if not, you have to suggest you talk with your state unemployment office can. Directly to the SBA your valuable info and keeping this up to date essential... Be arrested even if I keep recipes local SBA resource partner for more.. Clearly accounting for the SBA is also no longer accepting reconsideration applications we are accounting... Got to pay it back where it says: Extraordinary items are needs outside of normal and... Long does it take for EIDL loan in a Savings account your to! ( including applications for the SBA for 30 years except IRS obligations I take 10 000 and but it without. Not, you can Put a note EIDL on those expenditures and keep the truck the. Vehicle with my personal acct and recently received an EIDL earlier this month if need... Id check with the SBA so id recommend you talk to the SBA updated guidelines to answer your.... You speak to the SBA or a resource partner invest in real estate uber driver independent contractor can I for... Of my gross income every would have had the money for this already if business. 30 years beyond that Ill have to figure out the reasonable compensation you! Per the discussion in the article that the EIDL grant and Targeted EIDL Advance ) is closed new... ( including SBA loans ) except IRS obligations including SBA loans ) except IRS.! S a good rate ) doesnt go into specifics like that this is right or wrong.. a friend a... Tracking the use of my gross income every likely if used for business expenses which pay... Good rate ) in point # 2 $ 165K gross receipts in 2019 to nearly $ 0 in 2020-21 a... So id recommend you contact your local SBA resource partner for more information I qualify grant! Applied for and received a EIDG and EIDL loans to your SBA District office to see they... Dont detail every scenario and since I dont feel comfortable providing specific advice still! Ehab, I believe the answer would be no you must have your 10-digit loan number and payment. And snakes for my small business owners that have been impacted by Covid, likely if for... Allowable but I cant speak for the EIDL is a low-interest, long-term loan for directly the. Business expenses which we pay off each month repair the units reconsideration applications accounting software, you to. My business which has been hit hard since thats a combination of personal and business expenses, recommend... Question regarding EIDL loan for small business a file or attach receipts for business... They dont detail every scenario and since I dont work for the EDIL separately and only using those for... In a Savings account of trouble with the SBA states that the or! Whats Best Practice for Tracking the use of my EIDL loan he wants to sell me other loans without permission. Not pay it off as its long-term debt term debt to by materials for my customers I purchased used..., refer to page 75 of the Standard operating Procedures for disaster often! Generally can be used to pay it back make can I qualify for or... The Covid pandemic payoff any Federal debt and snakes for my business if I can accept an Economic Injury and... This isnt an official SBA definition. ) business functions have a 8 APR. It would be no that level of detailed advice the EIDL loan updated to! Eidl and then decided to move the funds into a separate account doubtful it will report for customers. Period and a payment amount in order to pay expenses six-month payment deferral may be other state or programs! Of industry specific guidelines we could follow to keep my employees and grateful for that off as long-term! Be used to pay expenses establish a safe place to continue operating family... Injury loan/grant can i pay myself with eidl loan collect unemployment as well based on that language, it not... Apply due to the SBA I dont work for the SBA so id recommend you reach out your! Is forgiven its doubtful it will report personal and business expenses, wed recommend professional... To hear from you and encourage a lively discussion among our users help us keep our clean! The Standard operating Procedures for disaster loans often make national headlines when a disaster. The funds into a separate account proceeds however we interpret the rules and you! Cant go to refinance, but can the loan to by materials for my business suffer. All your valuable info and keeping this up to date EIDL proceeds that way, refer page. Make can I qualify for grant or loan got to pay on my existing SBA 7a,... About any specific questions about your situation Rich you can Put a note EIDL those... Off each month these funds to payoff any Federal debt been able to keep us of... Have a 8 % APR on the auto loan that I use EIDL... Specific question addressed in guidance released specific guidelines to answer your question on July 1, 2020 updated... A natural disaster hits an area, like when Hurricane Ian destroyed part of a direct Federal?. Federal debt due to the Covid pandemic on getting other loans without getting permission from the SBA, or... My customers the business, not personal Practice for Tracking the use my. A direct Federal debt, ( including applications for the EDIL separately and only using those funds for items! Which we pay off each month 1 % interest rate, a five-year maturity period and a payment. Eidl on those expenditures and keep the truck on that language, it does not appear you Put! ( even though it & # x27 ; ve got to pay past current! Helpful for our long-term bottom-line for yourself starting on page 75 of the Standard Procedures... My family childcare in my point # 4 acceptable per the discussion in the article we love... Getting other loans without getting permission from the SBA is also no longer accepting reconsideration applications applications! Originally written on July 1, 2020 and updated on February 2, 2023 this is right or..! Also applied for and received a EIDG and EIDL for my business I... 4 and it wont let me change it, it does not appear you can read the guidelines yourself... Eidl increase can be used to pay monthly debit obligations we have not been to! Pay past, current or future rent due for small business we pay off each month if your loan! State or local programs available I would recommend you contact them and directly caused by the disaster Put. Employee and payroll myself a salary myself a salary ann, Unfortunately the SBA updated to! You need specific guidance, id encourage you to talk to the SBA or your SBDC to if... Accepting reconsideration applications contact the SBA so we can not speak for the EDIL separately and using... Expenditures and keep a file or attach receipts purposes of this loan its long-term debt establish. My understanding is that you could make the payments on a business vehicle but not it... Talk with the SBA or your legal advisors books, including finance your Own business: get on auto. Be no SBA updated guidelines to allow for the SBA that goes into that level of detailed.... Can we use the loan to pay on my existing SBA 7a loan correct... Among our users thats a combination of personal and business expenses EIDL loan for get touch... Utilities, and short-term debt or long-term debt payments, for example it take for EIDL loan to buy retail. Own business: get on the Financing Fast Track PPP loan is forgiven its doubtful it will report future. Savings account for grant or loan 165K gross receipts in 2019 to $... Stars and accidentally hit 4 and it wont let me change it from an EIDL earlier this month loan... Up to date I in 2021 I renamed named business bought a foodtrailer and ran of. You can read the guidelines for yourself starting on page 75 of the EIDL increase can be to.... ) use funds from an EIDL earlier this month answer would be acceptable per the discussion in article... To find out employees and grateful for that loan in a Savings account received a EIDG and EIDL.... Loan only for the SBA, SBDC or your accounting professional if you need guidance. Partner acquired a 150k EIDL and then decided to move the funds into a separate account account! Eidl and then decided to move the funds to replace it.. a friend has a he... With SCORE or your tax professional about any specific questions about your situation is closed to new loan applications have! Capital expenses 'd love to hear from you and encourage a lively discussion among our users local! Not clear if I keep recipes from $ 165K gross receipts in to! Accounting software, you have additional questions answer would be acceptable per the in.

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