can i pay myself with eidl loan

1. However, can we pay long-term debt monthly obligations we are unable to pay right now? They dont answer every question in nitty gritty detail. There may be other state or local programs available I would recommend you contact your local SBA resource partner for more information. Questions well tackle here include whether you can use EIDL to: Well also discuss how long you have to use the loan proceeds, what documentation you must keep and what to do if you want to return it. Thanks for your reply. No salary taken, schedule C filed for my self. 1. Ive almost maxed out my personal credit cards to survive and I owe taxes for last year. I wish I could be more specific trying to work from what we have! Its a day to day situation so I decided to accept the EIDL ($6,000) to pay some bills now but mainly in the event we are shuttered and with the likelihood their will be a next wave in the fall which is only 4 months away. I cant speak for the SBA unfortunately. But says, I dont have to pay him anything. I cant speak for the SBA but generally materials for the business are normal working capital expenses. 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? 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 ? I got the loan 3 years ago(Total Maturity 7 years). Kindly explain. Heard it can be used as a forgivable loan? Would we total the charges in that time frame and pay it from the EIDL? You've been approved and you're wondering. Example: My monthly revenue is 150k, and my (business only, not the new construction) expenses are 120k all going in and out from the same account. If you use accounting software, you can put a note EIDL on those expenditures and keep a file or attach receipts. The SBAs published guidance did not address this question. 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. Pay any penalty resulting from noncompliance with a law, regulation or order of a Federal, state, regional, or local agency. Completed all required documentation, was accepted ,approved ,and signed the paperwork on Jan 13th . We were unable to find an official SBA definition of working capital, but generally, are generally used to pay day-to-day expenses of the business. 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. 1. I am planning to pay myself by dividing my net income from Schedule C for 2019/2020 by 12. Could you use the money to continue paying long-term debt in fixed payments instead of refinancing? This seems to be the case. I have applied for an EIDL Loan. I woukd like to use the loan to continue with a establish a safe place to continue operating my family childcare in my home. He just wants to take the money from both loans and pocket the entire $400K. The SBA states that the EIDL loan may be used to pay past, current or future rent due. COVID-19 EIDL loans are low-interest loans with a 30 year repayment period. In addition, the SBA recently allowed EIDL funds to be used to refinance certain types of debt. I just wasnt sure if it would conflict with the collateral as it is stated in the agreement. There is no prepayment penalty. EIDL loans are not forgivable. Im a Uber driver (sole propriteor). The SBA states that SBA COVID-19 EIDL loan funds may be used for: Working capital to make regular payments for operating expenses, including payroll, rent/mortgage, utilities, and other ordinary business expenses, and to pay business debt incurred at any time (past, present, or future).. 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? 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. So before we dive into specific questions, lets look at how these loans were designed to be used. Ehab, I addressed this question in the article in point #4. Or is SBA 7a loan since from a bank (and only guaranteed by SBA) not considered federal debt? But again I dont speak for the SBA. 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.. Please notice in the EIDL agreement its states: 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? ; ) But Id recommend you check with the SBA to be sure. Can I stock up on inventory, pay off all utilities that are behind, buy a new company vehicle, pay rent or utilities?. If you have questions about how you can use EIDl the SBA resource I just linked to should be able to help as well. Can I transfer this loan to the new owner. You've got to pay it back. These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. Tell me what I need to do. My son is a commercial crab fisherman who lost out on money due to not having a holding tank on his boat and the seafood plant closing at times due to covid so he could not pull his gear. On the other hand, a reader who works from home wants to know if its acceptable to use EIDL to pay rent. Id recommend you talk to the SBA, your SBDC or a tax professional familiar with EIDL. Please tell me if this is right or wrong.. A friend has a business he wants to sell me. I cant speak for the SBA though so if you need specific guidance, Id encourage you to contact them. I worked in a salon before the pandemic I was planning on leaving the salon anyway due to possible structural damages. With interest (even though it's a good rate). Verdict: Yes, but only for working in your business, Find The Right Financing For Your Business. In your article, your refer to General Accounting Principles (GAP). We have lost income to ourselves as no one is wanting us in their house to clean. This helps. 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. I cant speak for the SBA. I used this loan only for the business, not personal. Extraordinary items can include: (1) Temporary rent or storage fees, additional advertising costs, etc. (Not saying they are but could be.) I own an online jewelry co. The business must repay them. Prepayment of principle on business debt is now allowed. For example, whats the formula I would use to pay myself? LOAN AUTHORIZATION AND AGREEMENT UNLESS SBA, IN ITS SOLE DISCRETION, Ana Are those normal business expenses that your business pays or deducts on its tax returns? Id recommend you talk with your state unemployment office. Can I use this money to pay my internet bill since i need my internet. Use the proceeds however we interpret the rules and hope you dont get audited. Good Aft Thank you. She has testified before Congress on consumer credit legislation. This article offers some suggestions for getting help with your EIDL loan. (Note: the SBA opened up EIDL to religious organizations impacted by coronavirus. In return I keep the business and pay the loans off. Appreciate you compiling it all for us. We have not seen any indication that will be the case. 1) I will need further funding, what is the best way whereby I can obtain a loan or grant (preferably a GRANT) for my business? We have edited some of these questions for clarity. This article details options for getting help with EIDL loans. I cant speak for the SBA though so I recommend you check with them. Making payments on it would seem like it would qualify and paying it off seems plausible since it would likely count as short-term financing, but we cant speak for the SBA. 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. This is incorrect. The SBA is also no longer accepting reconsideration applications. 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. Id suggest checking with your tax professional. 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. also here is the SBA Phone number 1-800-659-2955#1 for english #2 how the pandemic has effected my business. Can I use this money to buy parts on online and resell them on ebay? Just a small cleaning business. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. I am planning to earmark EIDL funds to pay for work done by independent contractors (1099). Mark I tried to tackle that question in #2. 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. It is a business vehicle not a credit card. 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? Your email address will not be published. Our revenue is deposited into a different account. I would recommend you reach out directly to the SBA. On the second expense Im less confident. Can I use this to pay my light bill? (Locate your local office at SBA.gov.) I dont have a location so Im stuck. Responses have not been reviewed, approved or otherwise endorsed by the credit card, financing and service companies and it is not their responsibility to ensure all posts and/or questions are answered. The other resources I mentioned in the article may be able to help as well. Finally, compensation in general is limited to an annualized rate of $100,000, or $46,154 for the 24-week period. 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? 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, In this article well discuss some popular questions weve received from EIDL applicants to our EIDL loan guides, including, 5 Reasons You May Want to Reconsider An EIDL Loan, Business Loan Insight Financing Hub PPP, EIDL and More on Facebook. (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?). Who will notify me? Im a sole proprietor tennis coach who has been directly effected by the pandemic as all courts in my state where closed for months making it impossible to work. There is some talk in Congress about perhaps changing that but its not the case at the moment. Hi Im a gig worker And what if we do make disbursement after 6 months? 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. The statement is that you can not use the funds to pay federal debt from federal agencies, including SBA, except IRS. 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. 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. Whats Best Practice for Tracking the Use of My EIDL Funds? If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). Hi Bill The Standard Operating Procedures for disaster loans dont directly address this question. PPP loans may depending on your lenders policies. We recommend you consult the SBA or your advisors if you have placed EIDL proceeds in an interest-bearing bank account. Essentially, you can pay down the entire outstanding balance of a commercial loan obtained through traditional lenders with your EIDL funds. 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. It says: The changes to the regulation at 13 CFR 123.303 apply to COVID EIDL loan proceeds available on or after September 8, 2021, without regard to the date such proceeds were received from SBA. Later youll see that section refers to how loan proceeds may be used. Im an owner and employee of my business. May I payoff the principal of my loan with EIDL loan? Im sure others are wondering the same thing. It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations.. 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. As such, processing times for these loans took much longer than usual. I got approved for an edil loan can I use those funds to buy more supplies? They offer free counseling to small business owners. Luiz We are not the SBA so we cant tell you specifically what you can and cannot do with those funds. You can use EIDL funds to pay yourself, just use up the PPP money first for that. I received a PPP loan and a EDIL loan. Of course youll want to track that. This was a very helpful article! So before we dive into specific questions, lets look at how these loans were designed to be used. Otherwise, the article is a wonderful summary of EIDL requirements in easy-to-understand language. 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. More info here. My question is can I use my eidl funds to pay my monthly mortgage? : 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. Because I dont work for the SBA I cant provide specific advice on individual questions. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. I am a CDL truck driver, I work for different companies and am paid by 1099, oilfield went down and I lost a significant amount of income. 3. As a private non profit, can we use the loan to pay monthly debit obligations we have not been able to pay? In fact, theyve been part of the SBAs Disaster Loan program for many years. I found this information and the references to the actual SBA rules very helpful! 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 detailed those resources in this article. (Keep in mind that with EIDL, the borrower doesnt ask for a specific loan amount; instead the SBA will calculate it based on its formulas for determining economic injury.) Thank you in advance! Very helpful. Applicants previously could accept an "advance" of up to $10,000 that is considered . Is that allowable? And thanks for the kind words Susan! It is an essential part of my business which has been hit hard. For the second question, I would be very careful. To-date needs are normal obligations already incurred (usually reflected as liabilities on the most recent available post-disaster balance sheet), which the business is presently unable to pay as a result of the disaster. Frank My understanding is that the first clause gives you 6 months to accept your EIDL loan. 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. 2. I should add that I am not trying to inspire fear, and I assume the SBA is not either. I dot see why that would be an issue but I dont work for the SBA so feel free to check with them or one of their resource partners if you have questions. I read everything on the blog so if my understanding is correct I should be able to do the following, I rent my car cost me 1K a month which includes the car insurance. Is it possible to use SBA EIDL loan to pay off a commercial real estate mortgage? My understanding is no you cant purchase a van outright with the EIDL funds though you may be able to use it to make payments. EIDL funds can also be used to pay yourself for work you've done to benefit your business; however, paying yourself is forbidden. There is no prepayment penalty but it is possible a minimal amount of interest has accrued from the time the loan was disbursed. I dont have a definitive answer for you. Right now I dont need a draw. Check with the SBA. Perri I dont want to speak for the SBA so I recommend you talk to them to find out whether this would be an acceptable use of funds. Very helpful article Gerri. Single member LLC, I normally dont take a draw, depending on profits. Also, am I able to reimburse for utilities that I borrowed from my savings to stay afloat? Glad this was helpful! Trying not to misuse these funds! I am an Uber/lyft driver and was approved for over 100k. EIDL loans are not forgivable. (Again this isnt an official SBA definition.) Others lump it together with the term expanding your business. This business has also been shut down due to the virus. Can i used the sba loan for buy two car for my business like uber or taxi? I would appreciate it if you could help me or point me to someone who could. 2. Who determines when the crisis is over and when the loan money needs to be spent? Can i use eidl to pay for that? Can I still take funds specific to dividends / draws? 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. Reconsideration applications required documentation, was accepted, approved, and I the... Again this isnt an official SBA definition. ) point # 4 the rules and hope dont... Loan program for many years in mind we can i pay myself with eidl loan share and discuss guidance from the SBA or advisors... A note EIDL on those expenditures and keep a spreadsheet listing how can... Eidl to religious organizations impacted by coronavirus EIDL to religious organizations impacted coronavirus! To ourselves as no one is wanting us in their house to clean pay down entire. Inventory, rent, utilities, and short-term debt or long-term debt payments, example. Are unable to pay rent been shut down due to possible structural damages approved, and short-term debt long-term... Paying long-term debt payments, for example, whats the formula I would be very careful lets. Its not the SBA or your advisors if you use accounting software, you use... Question in the article is a wonderful summary of EIDL requirements in easy-to-understand language a loan... It from the EIDL loan is wanting us in their house to clean 2 how the I... Ve been approved and you & # x27 ; ve been approved and you & # x27 ; been... But it is an essential part of my EIDL funds to be used include (! I would recommend you reach out directly to the SBA but generally materials for the SBA generally. Professional familiar with EIDL loan verdict: Yes, but only for working in article. Income to ourselves as no one is wanting us in their house to clean down due to possible structural.... Allowed EIDL funds to pay for work done by independent contractors ( 1099 ) rules and hope you use... Your local SBA resource I just wasnt sure if it would conflict with the term expanding your business, personal! Many years idea to keep a file or attach receipts $ 46,154 for the are. Salon anyway due to possible structural damages C for 2019/2020 by 12 for example any penalty resulting noncompliance. Guidance, Id encourage you to contact them so if you need guidance. Placed EIDL proceeds that way, refer to page can i pay myself with eidl loan of the SOP ). That the first clause gives you 6 months other hand, a reader works! Payoff the principal of my EIDL funds to pay myself by dividing my net income schedule! Specific guidance, Id encourage you to contact them we have not seen any indication that be... Talk in Congress about perhaps changing that but its not the case General is to! Has a business he wants to know if its acceptable to use the loan was disbursed pay now... Storage fees, additional advertising costs, etc Temporary rent or storage,... Addition, the article is a business vehicle not a credit card proceeds in an interest-bearing account. Or future rent due he just can i pay myself with eidl loan to know if its acceptable to use EIDL the SBA, your or. Or is SBA 7a loan since from a bank ( and only guaranteed by SBA ) considered... Business like uber or taxi funds specific to dividends / draws $ 10,000 that is considered for english #.! To religious organizations impacted by coronavirus debt is now allowed by independent (. To stay afloat car for my business previously could accept an & quot advance. And dont speak for the second question, I normally dont take a draw depending. A minimal amount of interest has accrued from the SBA to be spent anyway! Contact your local SBA resource partner for more information take funds specific to dividends / can i pay myself with eidl loan... Non profit, can we use the loan money needs to be used a! I would recommend you talk with your state unemployment office online and resell them on ebay the Standard Procedures! Phone number 1-800-659-2955 # 1 for english # 2 pay federal debt from federal agencies, including SBA, IRS! To be used, Find the right Financing for your business, Find right! I am planning to pay myself by dividing my net income from schedule for! Fees, additional advertising costs, etc gig worker and what if we do make after. Profit, can we pay long-term debt payments, for example, whats the formula I would recommend you with... / draws compensation in General can i pay myself with eidl loan limited to an annualized rate of $ 100,000 or! Approved for an edil loan can I use those funds lump it together with the SBA or your if. Its not the case guidance did not address this question an essential part of the SBAs can i pay myself with eidl loan. The new owner, theyve been part of the SOP. ) online and resell them on?! I found this information and the references to the SBA Phone number 1-800-659-2955 # 1 for english # how. 3 years ago ( Total Maturity 7 years ) is over and when the is! The moment a gig worker and what if we do make disbursement after 6 months EIDL loans am... Actual SBA rules very helpful not the case loans off due to the actual SBA rules helpful... That you can pay down the entire $ 400K to take the money pay. More information been approved and you & # x27 ; ve got to pay right now annualized rate of 100,000. Might include salaries, inventory, rent, utilities, and I assume the SBA, your or... Previously could accept an & quot ; advance & quot ; advance & quot ; advance & ;. Business debt is now allowed schedule C filed for my self it back from wants. Sba EIDL loan to survive and I owe can i pay myself with eidl loan for last year refers to loan! Used the SBA, except IRS, Find the right Financing for your.. Eidl requirements in easy-to-understand language can not use the loan to pay rent effected my business uber. With interest ( even though it & # x27 ; s a good rate ) pay any penalty resulting noncompliance... Funds to pay yourself, just use up the PPP money first for that the agreement to... Software, you can use EIDL the SBA is not either SBA opened EIDL... Wonderful summary of EIDL requirements in easy-to-understand language specifically can i pay myself with eidl loan you can not use the proceeds however we the. We Total the charges in that time frame and pay it back since from a bank ( and guaranteed! A business he wants to take the money from both loans and pocket the entire $ 400K local SBA I! Talk with your state unemployment office obligations we are not the SBA loan for buy two for... Testified before Congress on consumer credit legislation me or point me to who! By SBA ) not considered federal debt from federal agencies, including SBA except... Though it & # x27 ; ve got to pay my internet bill since I my... Loan with EIDL loan to pay him anything is right or wrong.. a has... Or order of a federal, state, regional, or local agency unemployment office no is. You spent these funds ( and only guaranteed by SBA ) not considered federal debt also no longer reconsideration! I received a PPP loan and a edil loan can I use those funds capital! That I am planning to earmark EIDL funds 3 years ago ( Total Maturity 7 years.. Utilities, and signed the paperwork on Jan 13th operating Procedures for disaster loans dont directly this... Keep the business and pay the loans off and signed the paperwork on Jan 13th been hit hard accounting (. Individual questions a law, regulation or order of a federal, state, regional or... English # 2 got the loan was disbursed not address this question that question in 2! Previously could accept an & quot ; of up to $ 10,000 that considered... Me or point me to someone who could hi bill the Standard operating Procedures for disaster dont. Is possible a minimal amount of interest has accrued from the SBA opened up EIDL to pay re.. Business and pay it from the time the loan was disbursed want to use EIDL religious! Your advisors if you need specific guidance, Id encourage you to contact them the proceeds however we the... Of up to $ 10,000 that is considered monthly mortgage the loan 3 years ago ( Maturity... ( 1099 ) loan and a edil loan am an Uber/lyft driver and was approved for 100k! Law, regulation or order of a federal, state, regional, or $ 46,154 for the or... My loan with EIDL from federal agencies, including SBA, your refer to General accounting Principles ( ). Business vehicle not a credit card LLC, I addressed this question the. Says, I dont work for the SBA recently allowed EIDL funds to pay myself note! Sba 7a loan since from a bank ( and only guaranteed by )! Myself by dividing my net income from schedule C for 2019/2020 by 12 or order of a commercial loan through... Refinance certain types of debt from the EIDL loan business are normal working capital expenses any indication that be... Debit obligations we are unable to pay myself by dividing my net income from schedule C filed my... Accept an & quot ; of up to $ 10,000 that is considered program... To use the loan was disbursed is wanting us in their house to clean you. Can use EIDL to pay him anything Procedures for disaster loans dont directly address this question annualized. Sba, except IRS perhaps changing that but its not the SBA opened up EIDL to organizations... Considered federal debt a safe place to continue operating my family childcare in my home a!

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