Can I buy a new t. Use the proceeds however we interpret the rules and hope you dont get audited. My payments are extremely high and I can not go on making that payment. The PPP was designed to continue your 2019 payroll for a period . Hi! He also lost gear due to this. If yes, can I use the same formula as PPP loan to pay myself by taking the Gross Income on Schedule C Line 7 and divide it by 12 to determine the average monthly payroll? 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 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? Pay Yourself and Your Employees Paying yourself is of the utmost importance. The SBAs published guidance did not address this question. Id recommend you either talk to the SBA or get in touch with SCORE or your SBDC to see if they have advice. Can I used the EDIL to pay for training and certification? I cant speak for the SBA so I cant advise about specific uses of funds. Good Aft I raised it in this article: 7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP. Im wondering if when I receive funds if I can pay off the credit cards, unsecured loan and second mortgage directly related to downturn in my business during Covid period. I am the sole owner of a S Corporation. I still am not clear if I can accept an Economic Injury loan/grant and collect unemployment as well. ; (2) Accelerated debt due to the disaster; (3) Inventory replacement may be an extraordinary item. I am an independent contractor and all of my business dried up with the pandemic. I now know though I was approved for a PPP loan that was utilized 100% to payroll costs, I may use the EIDL for payroll as well. Thank you. Additionally, could funds from the revenue account be invested as they are accounted for independently of all loan proceeds? I got the private loan in Sept 2020 and it has a term of 12 months. First, buying a home clearly falls outside the intended uses of EIDL. That doesnt sound like an acceptable use but I cannot speak for the SBA. 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 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. I worked in a salon before the pandemic I was planning on leaving the salon anyway due to possible structural damages. ), Economic injury may be reduced working capital, increased expenses, cash shortage due to frozen inventory or receivables, accelerated debt, etc. I got the loan 3 years ago(Total Maturity 7 years). Those seem like normal working capital expenses that would typically be allowable but I cant speak for the SBA. I like to resume when situation gets little better. The guidelines arent that specific Erin so Id recommend you contact the SBA if you still have questions. I used this loan only for the business, not personal. This article currently has 1191 ratings with an average of 4.5 stars. Can I please use the loan to pay off my car or pay at least 3/4 of it and use the rest for my business? My suggestion Tom is that you check with the SBA. Many people want to know, can I pay myself withe the EIDL loan? I have a business car(had it before pandemic) and I would like to pay it off with the disaster loan. Your accountant may be able to help. Can I rent a temporary location? Can I Use EIDL to Start a New Business? Thanks for your article and your advice. Is it illegal to take the money from the business account and place it elsewhere? There is some talk in Congress about perhaps changing that but its not the case at the moment. 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. , where these loans have been a popular topic of discussion. It is in my name because my business did not have credit when I financed it. 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 also want to point out its a 30 year loan Im paying interest on along with a origination fee Any helpful advice is much appreciated. Great article! Marcus I would recommend you speak to the SBA. That seems to be the purpose of the loan to pay normal and ordinary expenses the business cannot pay due to the disaster. Another wrote: I am an Uber driver (independent contractor) and received a $41,000 EIDL loan as an independent contractor. I would not recommend you buy a business without getting a professional valuation of the business to determine its worth and with an attorney involved. Many business owners, including the sole proprietors and independent contractors who got these loans, have never used a government loan program like this before and are worried about the possible consequences of using their EIDL funds incorrectly. I am a truck driver (owner operator) and recently applied and was accepted. of the credit card, Also only salon phone not your cell phone. If you have questions about how to use your EIDL funds I recommend contacting the SBA or one of its resource partners. I am an Uber/lyft driver and was approved for over 100k. 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. Finally, compensation in general is limited to an annualized rate of $100,000, or $46,154 for the 24-week period. Thank you. Some seem to think relocation means moving your business outside of the state in which its currently located. For the second question, I would be very careful. 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. Moe SBA changed some of its allowable uses of EIDL funds over time. My business is a rental property that has been vacant for half the year after tenants left. In a smaller, more local disaster, EIDL program loans may fund in a matter of weeks. Instead of applying through the SBA, I applied through a private business lender to help me get through the pandemic. Thanks for the information. He wants to sell me the business for 400K. Sarah Its a dilemma, I understand. In other words, lets say your average weekly profit from 2019 was $2,000. 2. The guidance I shared in this article came from the Standard Operating Procedures for Disaster Loans which you will find here. John I would recommend you check with SBA before you use EIDL to pay off your other SBA loan. Of course youll want to track that. You can use EIDL funds to pay yourself, just use up the PPP money first for that. Because of Covid and other business expenses, the entity requesting EIDL funds (C-corp) is behind on rent payments. If you received your loan after June 5, 2020, you apply based on the 24-week period. If not, we wont have a business to spend the money on. I have several questions but from the looks of the questions and replies here, I will likely be told to speak with the SBA. You may want to check with the SBA. Very helpful article Gerri. I am considering signing a lease for my first shop space for my business and wanted to know if I can use the money I received from the EIDL targeted advance for the security deposit and first months rent payment due at lease signing? Ive written about that here. But again, I recommend you check with the SBA for specific questions as we cant speak for them. Id suggest checking with your tax professional. Normal expenses incurred to run your business are fine. The PPP ties into the EIDL program because businesses and organizations that received EIDLs between January 31, 2020 and April 3, 2020 have the option to refinance their EIDL into a PPP loan if they used the EIDL to cover payroll costs. So my building expenses could be paid with a mixed money EIDL/business monthly income or possibly fully paid with the business monthly income. Frank My understanding is that the first clause gives you 6 months to accept your EIDL loan. It doesnt seem like it would be an appropriate use of the funds but I dont want to speculate. You're not alone, after doing some research I'll be answering that question in this video. I own an online jewelry co. I had an accident that made me not able to walk for three months and cant drive for long hours like I use to do. 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). After the emergency is over will we have to return any unused portions of our EIDL grants? She has testified before Congress on consumer credit legislation. Not a non-profit) 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? I wish I could be more specific trying to work from what we have! 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. Im sorry its been so difficult for you. However, can we pay long-term debt monthly obligations we are unable to pay right now? But thank you for the dry reading. If the funds are not used properly that could create liability issues. Do I need to add my backpay onto Form 2202 Statement of Liabilities. Please help us keep our site clean and protect yourself. 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? I only wish there were some kind of industry specific guidelines we could follow to keep us out of trouble with the SBA. But if you continue to work in your business, paying yourself for the work in the business appears to be a reasonable use of these funds. Our landlord wants to sell the property our business is currently leasing? also here is the SBA Phone number 1-800-659-2955#1 for english #2 how the pandemic has effected my business. It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations. Dont waste hours of work finding and applying for loans you have no chance of getting get matched based on your business & credit profile today. The guidance the SBA did release was rather broad and it did not spell out every 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. If your business is operating at 100% capacity as compared to 2019, you can pay yourself based on that. Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. Knowledge is a confidence booster! I have a 8% APR on the auto loan that I use for Uber driving. Ive been a salaried employee of the business for several years. 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? For the first it sees reasonable but the guidelines dont get that specific and I just cant speak for the SBA. I thought the point of the loan was to help us stay afloat while dealing with this problem. 1. Randy Relocation is not an acceptable use of funds. Can I use this money to pay my internet bill since i need my internet. To address your questions: 1. The website you can use to repay your EIDL loan can be found at Pay.gov. Sadly my wife and business partner acquired a 150k EIDL and then decided to move the funds into a separate account. (The EIDL grant does not have to be repaid.) Thank you for your time to help and answer all of us. : 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. And second, make sure you are not paying yourself with the EIDL for the same weeks that you paid yourself using the PPP. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant;. I would like to use loan proceeds to pay employees salaries, rent etc. Thank you. 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. I am a family childcare provider who operates in my home. If not, you have to figure out the reasonable compensation for you. Just a small cleaning business. Loan or Grant: A COVID EIDL loan is a loan that must be repaid. Unfortunately PPP is now closed. Prepayment of principle on business debt is now allowed. Our interest rate is higher than 3.75%, and isnt amortized for 30 years. I dont know what to do. After all, the SOP states that EIDL cant be used to pay: Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant.. Read more here. But I dont speak for the SBA. I detailed those resources in this article. And certification does not have to be repaid. 2019 was $.... Covid and other business expenses, the entity requesting EIDL funds ( C-corp ) can i pay myself with eidl loan behind on rent payments the! 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