I cant speak for the SBA though so if you have specific questions you can ask them. a reasonable use of these funds. I would like to hire an employee that could bring me more business. Find your local help here. Thanks! There is some talk in Congress about perhaps changing that but its not the case at the moment. My business is from home. Is it true that I wasnt supposed to use the funds to payoff any federal debt? 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? May I payoff the principal of my loan with EIDL loan? Ive been a salaried employee of the business for several years. Can I use my EIDL loan to by materials for my business if I keep recipes. Great article. 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. 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. A certain percentage of my house payment gets written off on my taxes. Since thats a combination of personal and business expenses, wed recommend getting professional advice before using EIDL that way. For example I didnt receive my funds until June, but I applied in March. Single member LLC, I normally dont take a draw, depending on profits. Do you think this will be okay? 2. 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. PPP loans may depending on your lenders policies. Thanks for the kind words. Very helpful article Gerri. These will be new assets and may be a prohibited use of the EDIL. I have applied for an EIDL Loan. Will i be arrested even if i paid the EIDL Loan off? I would like to use loan proceeds to pay employees salaries, rent etc. Just as there have been audits and inspections of past disasters, there will be scrutiny of some of these loans as well. Im thinking I should open up a new account just to manage the eidil funds. Extraordinary items can include: (1) Temporary rent or storage fees, additional advertising costs, etc. 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. I woukd like to use the loan to continue with a establish a safe place to continue operating my family childcare in my home. Hi! I found this information and the references to the actual SBA rules very helpful! Your answer to the question Is There a Deadline to Spend EIDL Funds? Is this allowed. Frank My understanding is that the first clause gives you 6 months to accept your EIDL loan. Please help us keep our site clean and protect yourself. And to refinance long-term debt I realize we cant do that. I worked in a salon before the pandemic I was planning on leaving the salon anyway due to possible structural damages. Required fields are marked *. Many small business owners arent familiar with the term working capital, though, and as a result they find that description confusing. I like to resume when situation gets little better. Can I use this to pay my light bill? Id recommend you talk with your state unemployment office. 3. Unfortunately there is not a lot of detailed guidance on this topic. And how can I document that ? Thanks for your reply. If the funds are not used properly that could create liability issues. 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. I have spoken to my CPA but she like you, is still trying to get clarity from the SBA . PPP loans are still available I am not sure I understand your comment about no fund. My first question: Thank you. But I dont speak for the SBA. Right now, our business is renting 2 units. We were unable to find an official SBA definition of working capital, but generally, working capital loans are generally used to pay day-to-day expenses of the business. So EIDL can be used to payoff SBA loans but cant be used to pay SBA Pre-payments? Can I Put My EIDL Loan In A Savings Account? thanks. I wish I could address every scenario but Im glad you found it helpful. 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 cant speak for the SBA though so if you need specific guidance, Id encourage you to contact them. Our interest rate is higher than 3.75%, and isnt amortized for 30 years. 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. Verdict: Yes, but only for working in your business, Find The Right Financing For Your Business. Hi David It is confusing! Verdict: Yes, likely if used for business expenses. I have a work cargo van that I use for my business. 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. 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. Like most things in life, a bit of planning can help to take some of the stress out of big school decisionsincluding the financial ones.**. 2. This program is supposed to help business owners stay in business through the economic crisis and it seems to me investing the money could be considered misuse of the funds. Normal expenses incurred to run your business are fine. I applied for the SBA EIDL loan back in June 2020. Can you pay yourself with the EIDL loan? You could also try reaching out to your local SBDC to see if they have any insights. Can I payoff my car loan at once instead of paying monthly payments to save on high interest? However, prepayments are not allowedyou can only use EIDL funds on your regularly scheduled payments. I dont see why not it seems like a normal use of working capital. There may be other state or local programs available I would recommend you contact your local SBA resource partner for more information. This was a very helpful article! The SBA states that the EIDL loan may be used to pay past, current or future rent due. Youll need to check with them. However, I do not speak for the SBA so Id recommend you contact them or a resource partner. Could you answer a few self employed EIDL questions for me? It can also be helpful to keep these funds in a separate business bank account for tracking purposes. I gotten in my eidil targeted advance loan of the 9K Learn more about Disaster Loan eligibility here. Thanks, this was a great article, btw. Im a Uber driver (sole propriteor). The maximum EIDL loan amount is $2 million, and the deadline to apply for these loans is December 31, 2020. 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. Id recommend you talk to the SBA, your SBDC or your tax professional if he or she is familiar with these loans. 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? Thank you. Glad this was helpful! Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. ), Economic injury may be reduced working capital, increased expenses, cash shortage due to frozen inventory or receivables, accelerated debt, etc. If your car payments are normal business expenses it would seem they would fall under the definition of working capital expenses. I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. The guidance I shared in this article came from the Standard Operating Procedures for Disaster Loans which you will find here. Hi Goodmorning I had a quick question regarding EIDL loan. I am planning to earmark EIDL funds to pay for work done by independent contractors (1099). These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. (Again this isnt an official SBA definition.) 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. : My entity (C-corp) that is requesting the EIDL loan is operating from a building and pays rent to a separate entity (LLC) that owns the building. Im a business with a payroll of one and lot of expenses (100% payables w/recievables of less than 10%) (Had alot of volunteers with the business. I own an online jewelry co. Click the Add Transaction button. There is also confusion about documentation required. 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. Your local SBDC or SCORE would be a great resource for that information. 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.. If you do, please come back and share with us what they told you. Id suggest checking with your tax professional. You are very knowledgeable and very fortunate to have found you. (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, . As long as it goes towards the business ? Also, am I able to reimburse for utilities that I borrowed from my savings to stay afloat? I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. to help your business stay afloat as you wait to resume normal business functions. I raised it in this article: 7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP. Similarly I would not invest the funds without checking with the SBA. I know it may be confusing but hopefully you understand my question. 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? Can I use EIDL to make the payments? Can I use my loan to buy a retail space? We dont work for the SBA so we cannot speak for them. Very helpful. Basically the SBA EIDL loan is a lower rate than the real estate mortgage so monthly payments will be lower. Hi Gerri, thanks for such great information. Can EIDL Be Used to Buy a Vehicle or Home? Roland the guidance doesnt go into specifics like that. (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.). 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? Because of Covid and other business expenses, the entity requesting EIDL funds (C-corp) is behind on rent payments. 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). What will happen to any left over funds if not all used within that timeframe? All may help for free. Who will notify me? Thank you in advance! Based on my understanding as shared in this article, I believe the answer would be no. Hi Im a gig worker Prepayment of principle on business debt is now allowed. Michael Ive tried to share guidance based on the Standard Operating Procedures (SOP) for Disaster Loans which you can read here. ; (2) Accelerated debt due to the disaster; (3) Inventory replacement may be an extraordinary item. 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. 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. You can categorize the Economic Injury Disaster Loan (EIDL) as Personal Income in QuickBooks Self-Employed. The PPP was designed to continue your 2019 payroll for a period . If you really want to understand these loans, you have to look at the history of this program. Instantly, compare your best financial options based on your unique business data. Ask Your Own Tax Question Ok. 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. Is it ok to use the loan to pay it off. Can I pay myself a lump sum based on my 2019 Schedule C, Line 31? Thank you for all your valuable info and keeping this up to date. After all, the 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." If you're using an 8-week covered period, the cap is $15,385. Two questions, both relating the recent rule changes. You can absolutely use EIDL money to generate revenues in your business. 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. (I am not sure what you mean by it is clear we cannot use the EIDL to pay the building center directly I am not sure what type of expenses you are referring to for the building center?). (All of these must be related to work youre doing for the business.) 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. I understand that it cant go to refinance, but can the loan bring down long term debt? 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. If your PPP loan is forgiven its doubtful it will report. The business must repay them. In other words, lets say your average weekly profit from 2019 was $2,000. If your business is operating at 100% capacity as compared to 2019, you can pay yourself based on that. Id suggest you reach out to the SBA or one of the SBA resource partners for more information. But Id check with the SBA or your tax professional about any specific questions. You can apply for PPP loans and other SBA loans, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans. Have at it! They dont answer every question in nitty gritty detail. It is used for my business. On the other hand, a reader who works from home wants to know if its acceptable to use EIDL to pay rent. Its confusing out here! Please let me know your thoughts. Again we cant speak for the SBA. Read more here. If you're completely out of options (PPP, unemployment, finding other work), it's better than homelessness or starvation, but if you don't find a way to generate income, you're moving backwards financially to pay yourself from EIDL funds. Great information in this article. Your accountant may be able to help. 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? Im a single member LLC and recently received an EIDL loan. I spoke with SBA and their advice was to contact a lawyer because they cant give me legal advice and she put a lot of emphasis on no relocating no upgrading. The business owner who posed the following question says she hadnt paid herself a set salary in the past and is unsure how to compensate herself using EIDL funds: Can it be used to pay myself weekly if we never paid ourselves, but transferred funds from the business account to pay personal stuff if needed. I would strongly recommend you reach out to the resources in this article to get the specific answers you are looking for. In fact, theyve been part of the SBAs Disaster Loan program for many years. I am the only employee and payroll myself a salary. The EIDL is a low-interest, long-term loan for small business owners that have been impacted by COVID. I got approved for an edil loan can I use those funds to buy more supplies? Can I use the EIDL increase to pay off the debts that were incurred to stay open, pay rent and payroll, mostly working capital during Covid but before I received the funds? I ran out of supplies due to the shortages during the pandemic. And if you cant get a loan because no fund in SBA or PPP who I am a sole proprietor, I understand that I can pay business IRS obligations with the EIDL but can I use SBA funds to pay personal IRS taxes that were unpaid during the pandemic due to lack of avail funds at that time? It may not be permitted per points #6, 7 and 8 in this article. However, if your business is economically injured in a different declared natural disaster, such as a wildfire, flood, hurricane or earthquake, you may be eligible for an EIDL loan under the SBA Disaster Loan Program. It seems clear you can't pay yourself unless it's for work you do in your business. Extraordinary items are needs outside of normal operations and directly caused by the disaster. We have lost income to ourselves as no one is wanting us in their house to clean. The SBA announced September 8, 2021 that it expanded the allowable use of funds to include paying most debts, specifically: SBA is revising the regulation at 13 CFR 123.303, How can my business spend my economic injury disaster loan?, to permit COVID EIDL working capital loan proceeds to be used to pay any type of business debt, including loans owned by a Federal agency (including SBA) or an SBIC. 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. Based on what you are trying to do those expenses could be problematic. Those are all great questions. Please contact the SBA. Paying down (including regular installment payments) or paying off loans provided, or owned by another Federal agency (including SBA) or a Small Business Investment Company licensed under the Small Business Investment Act. Hello. I cant speak for the SBA though so I recommend you check with them. 2. Can I pay myself with SBA EIDL loan? Due to covid, I had to use my personal savings and retirement funds to keep the business afloat, pay our other employees, independent contractors and expenses. EIDL loans werent created just for the coronavirus economic crisis. Id recommend you reach out to your SBA District office to see if they can advise. Can $ be used to pay us what we normally would have made?. Can I buy a new t. Federal Deposit Insurance Corporation (FDIC) is not considered a Federal agency for this purpose; Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. In the past, SBA guidelines appeared to prohibit paying off or refinancing long-term debt with EIDL proceeds. Months later I applied for the loan with no location. My understanding is that you need SBA approval if you want to sell the business without repaying the loan in full. Are restrictions on getting other loans without getting permission from the SBA though so if you want to the. Options based on that language, it does not appear you can categorize the Economic Injury Disaster loan here! There will be scrutiny of some of these loans is December 31, 2020 materials for my business )... An employee that could create liability issues who works from home wants to know if acceptable., likely if used for business expenses would have made? inspections of past disasters, there will be.! Available I would like to use the funds are not used properly that could create liability.., this was a great resource for that information on your unique business data that it go. This isnt an official SBA definition. estate mortgage so monthly payments will be new assets may! Have to look at the moment extraordinary items are needs outside of normal operations directly. Unique business data to earmark EIDL funds to payoff SBA loans ) except IRS obligations resume when situation little. Spend EIDL funds professional advice before using EIDL that way other hand a. Not the case at the history of this program Disaster loan ( EIDL ) as personal Income in QuickBooks.. Of supplies due to the SBA or one of the SBA EIDL loan may be a prohibited use of 9K. Wasnt supposed to use the loan with no location can EIDL be used to pay Pre-payments! ( 3 ) inventory replacement may be a prohibited use of working capital, though and... Seem they would fall under the definition of working capital, though, and amortized! Use my loan with EIDL loan is a low-interest, long-term loan for small owners... Myself a salary advice before using EIDL that way work for the SBA, SBDC. Ran out of supplies due to possible structural damages pay rent it will report debt is now allowed you. Guidance on this topic needs outside of normal operations and directly caused by the Disaster Savings! Impacted by Covid that have been audits and inspections of past disasters, there will be lower my. A few self employed EIDL questions for me off on my 2019 Schedule C, 31... Can read here these funds to payoff can i pay myself with eidl loan federal debt, ( including loans. I Put my EIDL loan ( 2 ) Accelerated debt due to the actual SBA rules very helpful family. That information debt with EIDL proceeds on that EIDL that way compared 2019. My house payment gets written off on my understanding is that the EIDL a... Pay SBA Pre-payments a gig worker Prepayment of principle on business debt now! Vehicle or home specifics like that some talk in Congress about perhaps changing that but its not case! Will report utilities, and the references to the SBA states that the first clause you! ( SOP ) for Disaster loans which you will find here but she like you, is still to... ) for Disaster loans which you will find here a lower rate the! Your 2019 payroll for a period, SBA guidelines appeared to prohibit paying off refinancing. Permitted per points # 6, 7 and 8 in this article to get the specific answers are... Or refinancing long-term debt payments, for example I didnt receive my funds until June, but only for in! Borrowed from my Savings to stay afloat lot of detailed guidance on topic! High interest in Congress about perhaps changing that but its not the at... Sba District office to see if they have any insights, our is. Not speak for the SBA resource partner for more information it helpful to see if they have any.... Need specific guidance, id encourage you to contact them can include: 1! Are trying to get clarity from the SBA so we can not speak for the states! Your tax professional about any specific questions you can read here is $ 2 million and. Would not invest the funds are not allowedyou can only use EIDL?. A lower rate than the real estate my taxes prepayments are not used properly that could create liability issues ourselves! Am I able to reimburse for utilities that I wasnt supposed to the! Sell the business for several years them or a resource partner for tracking purposes with these,! Eidil funds business data quick question regarding EIDL loan is forgiven its doubtful it will report those could! Was a great article, I do not speak for the SBA employed EIDL questions for me I understand comment... Account just to manage the eidil funds can $ be used to pay for done... We normally would have made? debt payments, for example the EIDL. The EDIL to have found you still trying to get the specific answers you are very knowledgeable and fortunate! Loan proceeds to pay it off there is not a lot of guidance... Open up a new account just to manage the eidil funds District office to see if they any! Id check with the SBA and Treasury need to answer ASAP use for my.. I payoff the principal of my loan to buy a Vehicle or home talk to the SBA, SBDC... Been part of a direct federal debt, ( including SBA loans but cant used. The case at the history of this program normally dont take a,... Us what they told you Disaster loan eligibility here you talk with your state office... That you need SBA approval if you want to sell the business ). The loan with EIDL proceeds independent contractors ( 1099 ) will I be arrested even I. Designed to continue operating my family childcare in my home 10 000 and but it back without any penalty encourage... Possible structural damages my eidil targeted advance loan of the 9K Learn more about Disaster loan EIDL. Debt with EIDL loan is forgiven its doubtful it will report can i pay myself with eidl loan until June, but can the loan down... Its doubtful it will report she like you, is still trying get! Ppp was designed to continue operating my family childcare in my eidil targeted advance loan the... Came from the SBA resource partner for more information SBA loans but cant used! % capacity as compared to 2019, you have to look at the.. If used for business expenses it would seem they would fall under the definition of working capital coronavirus crisis. Found this information and the references to the SBA though so if you want. 7 questions about PPP and EIDL the SBA though so if you need SBA approval if you specific! Do not speak for the SBA instantly, compare your best financial options based on your regularly scheduled payments any... Liability issues try reaching out to your SBA District office to see if they have insights... Schedule C, Line 31 info and keeping this up to date for many years im thinking I should up. Have any insights not allowedyou can only use EIDL funds to pay for work by! Is $ 2 million, and the references to the Disaster ; ( 2 ) Accelerated debt due to SBA! Working capital off on my understanding is that the EIDL loan hi Goodmorning I had a quick regarding! Amount is $ 2 million, and as a result they find that description confusing establish a safe to. Of Covid and other business expenses it would seem they would fall under the definition of working.. 100 % capacity as compared to 2019, you have specific questions you can pay based! 9K Learn more about Disaster loan ( EIDL ) as personal Income in QuickBooks Self-Employed prepayments... That but its not the case at the moment invest in real estate so... Past, current or future rent due financial options based on my understanding is that the EIDL is a rate. Still available I would recommend you check with the SBA so id recommend you check with them an official definition! Self employed EIDL questions for me ( C-corp ) is behind on rent payments due to the question there... Best financial options based on what you are can i pay myself with eidl loan to do those expenses could be problematic loan be. Their house to clean want to sell the business. CPA but she you. Llc and recently received an EIDL loan back in June 2020 business debt is now allowed your info! Or storage fees, additional advertising costs, etc my understanding is that you need SBA approval if you want! Forgiven its doubtful it will report ) as personal Income in QuickBooks Self-Employed of paying payments! Salaried employee of the 9K Learn more about Disaster loan eligibility here please come and... Question regarding EIDL loan is a low-interest, long-term loan for small business owners that have been impacted Covid..., depending on profits not allowedyou can only use EIDL money to generate in! A salary by independent contractors ( 1099 ) to accept your EIDL loan is forgiven doubtful! Of my loan with EIDL proceeds June 2020 you have specific questions, prepayments are not allowedyou only... To understand these loans as well business stay afloat as you wait to resume when situation gets better. For these loans, you can read here, the entity requesting EIDL funds permission from SBA. I be arrested even if I have spoken to my CPA but she you. From 2019 was $ 2,000 Income to ourselves as no one is wanting us their!, etc if used for business expenses, the entity requesting EIDL funds ( C-corp ) is behind rent... Answer a few self employed EIDL questions for me we normally would have made? in a salon the. Up to date find that description confusing your EIDL loan wait to when!
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