In addition, the SBA recently allowed EIDL funds to be used to refinance certain types of debt. 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. 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. 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. We received the EIDL can we use some of it to purchase the real estate from him. 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? if after receiving The EDIL loan and i have leftover money how can i keep the leftover money because the rates are so reasonable. Im self employedand it says show receipts, do we just save our receipts and turn them in at some point?. 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. In other words, lets say your average weekly profit from 2019 was $2,000. If in doubt, you may want to ask the SBA or an SBDC advisor or SCORE mentor. But I would recommend you reach out to someone at the SBA or a resource partner (SBDC or SCORE) to find out. Its doubtful but I dont work for the SBA so Id suggest you check with them. Hi! SBA EIDL Loan. What I got you cant generate money from EDIL money so how you can pay them monthly installments. I never filed a schedule c. Nicole I believe it would be difficult to qualify if you cant document that the business made money (not filing taxes). loan proceeds must be used only for eligible payroll costs and certain eligible nonpayroll costs as set forth in program . What You Can't Use An EIDL For My lease on my truck is coming to an end and I have a balloon payment. Seems contradictory. 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? And yes I would encourage you to open a business bank account to manage and track these funds. Do not rely on this article for specific information on how to properly spend your EIDL funds. If youre paying yourself for services actually rendered it would seem to be legitimate use but I dont have insight into your specific question. Based on what you are trying to do those expenses could be problematic. You can always check with them. other SBA loans). The business must repay them. Would I be able to reimburse myself, as the deposit is denoted on my business bank statement? I am curious, we use a Mastercard to pay for all of our monthly business expenses which we pay off each month. Of course youll want to track that. Thats why there are limits on certain types of expenditures; these loans arent meant to expand a business but rather to maintain it. For example I didnt receive my funds until June, but I applied in March. Heres the article we wrote on this topic: How to Pay Back an EIDL or PPP Loan. My suggestion Tom is that you check with the SBA. There are some state local organizations making grants. Marcus I would recommend you speak to the SBA. Normal expenses incurred to run your business are fine. 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. Private nonprofit organizations: 2.75% fixed for 30 years . Great article. Extraordinary items are needs outside of normal operations and directly caused by the disaster. In return I keep the business and pay the loans off. Learn how to monitor the status of your COVID-19 EIDL, make payments, and request servicing actions. 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. I dont have a location so Im stuck. I do have UI but when I report even minor earnings my benefit is less than $100 for 2 weeks even with the temporary $600 from the fed so thats useless. Id suggest checking with your tax professional. 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. Based on the new forgiveness application form 3508EZ if you received your PPP loan on or before June 5, 2020, you may choose an 8-week Covered Period or a 24-week Covered Period. Trying not to misuse these funds! However they dont detail every scenario and since I dont work for the SBA I dont feel comfortable providing specific advice. I need a new motor. Michael Ive tried to share guidance based on the Standard Operating Procedures (SOP) for Disaster Loans which you can read here. Thanks for your insights. (All of these must be related to work youre doing for the business.) I would use 120k EIDL money to cover regular business expenses and 150k income to use in the new construction. Have at it! If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. Our monthly rent went up. This article describes how to get help with your questions about EIDL. 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? RE: Is There a Deadline to Spend EIDL Funds? 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? Besides second draw PPP loans the main option is EIDL loans. I still am not clear if I can accept an Economic Injury loan/grant and collect unemployment as well. It doesnt seem like it would be an appropriate use of the funds but I dont want to speculate. 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 ? I took out $30k second mortgage loan, a $10k unsecured loan and used my credit cards to survive downturn in my business during Covid. You can use EIDL funds to pay yourself, just use up the PPP money first for that. I cant speak for the SBA so I cant advise about specific uses of funds. Paying yourself and your employees (if you have them) is not only legitimate but necessary to keep your business running. I dont know what to do. 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. Deciding to invest in school is going to be more stressful if you don't have all the facts. What about for the lump payment the short term lender usually asks for? 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. 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.. Thanks for your article and your advice. Could you answer a few self employed EIDL questions for me? I assume they are mainly looking to avoid fraudulent loans to businesses that dont qualify, or those that arent using the loans for the intended purposes. Can EIDL Be Used to Buy a Vehicle or Home? Is there anyway I can return my EIDL loan money after accepting and signing the document of it? Hmmm, to be used to pay any type of business debt, including loans owned by a Federal agency (including SBA), 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). Click the Add Transaction button. Single member LLC, I normally dont take a draw, depending on profits. 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. Jo the SBA has not released specific guidelines to answer your question. Overall, the SBA approved about 3.9 million loans . I am an Uber/lyft driver and was approved for over 100k. I would like to hire an employee that could bring me more business. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. I wish I could say but I havent found a specific formula, unfortunately.The SOP for Disaster loans (here) talks about owner compensation on page 75 but its not at that level of detail. I applied for an EDIL loan and was approved. Id recommend you check with your local SCORE or SBDC office they are helping small business owners for free. Can I use this money to pay my internet bill since i need my internet. 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). Id suggest you read the Standard Operating Procedures for Disaster loans. Do these rule change apply retroactively to EIDL funds already received or approved? (Not saying they are but could be.) I dont want to speak for the SBA. My office computer crashed. 1) I received the EIDL loan in December 2020. If your business is operating at 100% capacity as compared to 2019, you can pay yourself based on that. Just a small cleaning business. But keep in mind the purposes of this loan. If not then it may be questionable. Can I side the funds to advertise ? Sarah Its a dilemma, I understand. Thanks! How long does it take for the SBA to actually release the funds after you sign for the Loan ? Months later I applied for the loan with no location. Please contact the SBA. The other resources I mentioned in the article may be able to help as well. HiI am sole proprietor and my business is a fitness training business..to keep my business afloat, with gyms closed and unable to travel or go to client homes, I had to do more online (I was doing some before covid) which meant buying equipment to be able to demonstrate to my clients what I wanted them to do. I cant speak for the SBA though so I recommend you check with them. Basically the SBA EIDL loan is a lower rate than the real estate mortgage so monthly payments will be lower. Appreciate you compiling it all for us. See what I wrote in #2 and #4 of this article. Can I use this to pay my light bill? I have a question. Business is slower so can I pay myself the offset amount I normally make a month. If you're using an 8-week covered period, the cap is $15,385. The guidance the SBA did release was rather broad and it did not spell out every situation. Hi Gerri 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. Do I read it as can be used to payoff the whole SBA loan or make SBA loan payments but NO SBA Pre-payments. I have 2 questions regarding spending the EIDL Loan. 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. Contact your elected officials in DC if you want to see this happen. 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. In this case am I correct in thinking it could be used to pay IRS business debt? Two questions, both relating the recent rule changes. Can I use my EIDL loan to by materials for my business if I keep recipes. I know it says paying fixed debt is an acceptable use. Hi! Self-employed individuals can pay themselves with PPP funds, by claiming their owner compensation replacement. Greg, As I stated in the article the SBA says: Whats Best Practice for Tracking the Use of My EIDL Funds? Can we use a portion of the funds to get our own property, and move our operation there? I gotten in my eidil targeted advance loan of the 9K If you have questions about how to use your EIDL funds I recommend contacting the SBA or one of its resource partners. One reader asks whether EIDL can be used to pay shop rent and that seems to be a very reasonable use of working capital funds. I am planning to pay myself by dividing my net income from Schedule C for 2019/2020 by 12. With interest (even though it's a good rate). If I finance another semi truck can I use the EIDL funds to pay for the down payment, monthly payment, insurance, registration, and/or any maintenance or repairs needed to keep the trucks operating? We have not seen any indication that will be the case. 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. Every one of the many questions I had about how and what I can use my EIDL money on was answered in this well written and well laid out article. Essentially, you can pay down the entire outstanding balance of a commercial loan obtained through traditional lenders with your EIDL funds. Can I pay my self from the proceed. Im currently not driving because of the pandemic. 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 SBA representative told me the only thing you can pay for short term loans (speaking business credit card)is the Min pay min. I want to sell my business which has an EIDL loan. 2) Ive been using the proceed to pay my monthly car loan and phone bill so far that I use for my business. Will i be arrested even if i paid the EIDL Loan off? 1. 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. 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. 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. Great information in this article. Do I need to add my backpay onto Form 2202 Statement of Liabilities. 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? Hi David It is confusing! Thank you so much in advance for answering. Is it ok to use the loan to pay it off. The Small Business Administration (SBA) approved over $390 billion in COVID-19 Economic Injury Disaster Loans (EIDLs) to help small businesses during the pandemic. I have a medical issue and want to change my line of business. Can I pay off my mortgage with it? Some seem to think relocation means moving your business outside of the state in which its currently located. Finally, compensation in general is limited to an annualized rate of $100,000, or $46,154 for the 24-week period. I applied for and received an EIDL loan this January and have had a difficult time navigating how to properly use it. It may not be permitted per points #6, 7 and 8 in this article. It seems like a plausible use of funds. Ehab, I addressed this question in the article in point #4. Not that Im aware of Saul. (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, . We recommend you talk with the SBA or your accounting professional if you have specific questions about your situation. My business was impacted mildly and have resumed 80%.. i used my PPP for all payroll Can i continue to use my EDIL for payroll, even if i am collecting income Also i have a 50,000 line of credit can i pay this off. Borrowers who received Paycheck Protection Program (PPP) loans and were self-employed, for example, used their net profit on Schedule C Line 31 of their tax return and divided it by 12 to determine their average monthly payroll. Thank you in advance! 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. In fact, theyve been part of the SBAs Disaster Loan program for many years. Thanks for the information. In this article well discuss some popular questions weve received from EIDL applicants to our EIDL loan guides, including Frequently Asked Questions about EIDLs and 5 Reasons You May Want to Reconsider An EIDL Loan, as well as in the Facebook group, Business Loan Insight Financing Hub PPP, EIDL and More on Facebook, where these loans have been a popular topic of discussion. Id suggest you ask the SBA or your tax professional. 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 Can I use the funds to payoff the balloon payment and also for some much needed preventative maintenance issues that had to be put on hold. So before we dive into specific questions, lets look at how these loans were designed to be used. Hi, I also applied for and already received funds from an EIDL earlier this month. As for reimbursing yourself for money you paid via savings, the guidelines dont get that specific. If I want to return the EIDL funds, can I legally let them sit in a brokerage account for a year before the payments start?, Remember, earlier we pointed out that the SOP states: 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.. Ultimately I dont have an answer to that question as its not something detailed in the guidelines. First, buying a home clearly falls outside the intended uses of EIDL. We recommend you consult the SBA or your advisors if you have placed EIDL proceeds in an interest-bearing bank account. 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. EIDL proceeds may not be used for: As one applicant commented on the Nav blog: So much information available on what NOT to use EIDL funds for, but Ive yet to find a detailed list of what funds CAN be used for., Its very vague on what I can use it for. Alternatively you can ask your SBA resource partner (SBDC or SCORE mentor). I am receiving unemployment for my W2 income. You may want to check with the SBA if you dont see the deposit soon. Hi Gerri, thanks for such great information. 1. 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. In fact, theyve been part of the SBAs Disaster Loan program for many years. I have been approved for a PPP second round loan and will receive those funds soon. It appears that buying a vehicle does as well, even if it is a business purchase. Unfortunately there is not a lot of detailed guidance on this topic. Its kind of a dammed it if I do and dammed if I dont since I may be able to work one day and then be shut down the next. Payment of any dividends or bonuses; And I read that anything you do in your business thats a natural , normal expense is far use. Very helpful article Gerri. Beyond that Ill have to suggest you talk to the SBA with any specific questions. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. May I payoff the principal of my loan with EIDL loan? Not a non-profit) You can either be an S Corp and pay yourself for services and pay the employment taxes. This was a very helpful article! What is your perspective on how we can use our revenue account? The website you can use to repay your EIDL loan can be found at Pay.gov. Mark I tried to tackle that question in #2. Can you help ? 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. Because I dont work for the SBA I dont feel comfortable commenting on a specific scenario Im sorry! Even though you paid yourself in a lump sum using the PPP, sole proprietor/independent contractor compensation is considered to be 11 weeks of owner pay under the rules of the PPP. My payments are extremely high and I can not go on making that payment. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. Thank you, this is all very helpful. And to refinance long-term debt I realize we cant do that. 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. Is that allowable? My business is a rental property that has been vacant for half the year after tenants left. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. Sadly, I never intended to misuse of funds. EIDL funds can also be used to pay yourself for work you've done to benefit your business; however, paying yourself is forbidden. Instantly, compare your best financial options based on your unique business data. Can you use the PPP to pay salary for the covered period, and the EIDL to pay salary AFTER that period? Verdict: Yes, likely if used for business expenses. . You could share this article with your accountant for their opinion. Check with the SBA. You can contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. I havent seen that specific question addressed in guidance. In your article, your refer to General Accounting Principles (GAP). 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. I have read about funds not being able to be used for relocation and Im wondering if you have a broader understanding of that term?