Thanks for the information. Can you use the PPP to pay salary for the covered period, and the EIDL to pay salary AFTER that period? Im concern some may not apply due to the Covid pandemic. The Small Business Administration (SBA) approved over $390 billion in COVID-19 Economic Injury Disaster Loans (EIDLs) to help small businesses during the pandemic. Can EIDL Be Used to Buy a Vehicle or Home? Great article. 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. 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." Thank you so much in advance for answering. When I got my Eidl loan I called SBA and ask them can I buy a car since I am driving for Lyft or Uber ,? I have a 8% APR on the auto loan that I use for Uber driving. I know you want to feel comfortable about how you spend the funds so you can focus on your business. 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. I suppose if you charged a new vehicle to the card they used EIDL to pay it off that could be an issue but otherwise I dont see why it would be an issue. Randy Relocation is not an acceptable use of funds. I was using my home but during covid I would like to move my operations outside my house in oder to keep my family safe during the pandemic. Your second question is in my point #2. Hi! 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. This article describes how to get help with your questions about EIDL. In your article, your refer to General Accounting Principles (GAP). Can I buy a place with it? If your business is physically closed, maybe you can take this time to work on your website, accounting, social media advertising campaigns, marketing etc. Id suggest you have him contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. See what I wrote in #2 and #4 of this article. Prepayment of principle on business debt is now allowed. Paying yourself from EIDL funds is a source of confusion for some. I only wish there were some kind of industry specific guidelines we could follow to keep us out of trouble with the SBA. Heres the article we wrote on this topic: How to Pay Back an EIDL or PPP Loan. Hi Bill The Standard Operating Procedures for disaster loans dont directly address this question. Can I transfer this loan to the new owner. Learn how to monitor the status of your COVID-19 EIDL, make payments, and request servicing actions. 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. I cant speak for the SBA I would recommend you talk to them. 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. On the other hand, a reader who works from home wants to know if its acceptable to use EIDL to pay rent. Marcus I would recommend you speak to the SBA. ; ) But Id recommend you check with the SBA to be sure. If your car payments are normal business expenses it would seem they would fall under the definition of working capital expenses. They offer free counseling to small business owners. Right now, our business is renting 2 units. This business has also been shut down due to the virus. Is it ok to use the loan to pay it off. Two questions, both relating the recent rule changes. 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. Do you have any advise for me? 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. 1. It is used for my business. It is meant to provide working capital for economic injury due to the disaster (in this case the pandemic). What Can I Use the EIDL Funds For | How to Use SBA. The Interim Final Rule from the SBA describes on the first page which changes are applicable when. Similarly I would not invest the funds without checking with the SBA. 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 applied for and already received funds from an EIDL earlier this month. Alternatively you can ask your SBA resource partner (SBDC or SCORE mentor). Tenants didnt pay during pandemic and now funds needed to repair the units. That does not appear to be an acceptable use of EIDL funds based on the definition we discussed earlier: 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. In addition, if relocation is an ineligible use for an existing business, its doubtful that starting a brand new business would be considered acceptable use. If the funds are not used properly that could create liability issues. I took out $30k second mortgage loan, a $10k unsecured loan and used my credit cards to survive downturn in my business during Covid. I am a family childcare provider who operates in my home. According to the Standard Operating Procedures for Disaster Loans (SOP 50 39) (which predates the COVID-19 crisis): 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. Two examples, we have created a new brand and we plan to separate the IP into a new LLC and create a separate marketing company which will lease the IP and feed sales leads to our parent company. I cant speak for the SBA though so if you need specific guidance, Id encourage you to contact them. He also lost gear due to this. Can we use a portion of the funds to get our own property, and move our operation there? Id consult with them or your tax professional for specific advice. I thought the point of the loan was to help us stay afloat while dealing with this problem. May I payoff the principal of my loan with EIDL loan? I tried to address that question in point #4 in this article. If your PPP loan is forgiven its doubtful it will report. And also I have about 18 months before starting to repay it back, if I would decide to invest that money and pay the whole amount back even before the deadline (that 18 months), will that matter to the SBA how I invested it ? 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. 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. Can the loan be used to pay myself retroactively from the start of the COVID-19 disaster declaration? Can I pay off my mortgage with it? I meant to give 5 stars and accidentally hit 4 and it wont let me change it. I still am not clear if I can accept an Economic Injury loan/grant and collect unemployment as well. Contact your elected officials in DC if you want to see this happen. We were approved, have no employees. I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. Do you think the SBA would approve this scenario or is there a better way to ask. PPP loans may depending on your lenders policies. I would have had the money for this already if my business didnt suffer during Covid. The guidance I shared in this article came from the Standard Operating Procedures for Disaster Loans which you will find here. I applied for and received an EIDL loan this January and have had a difficult time navigating how to properly use it. I am an Uber/lyft driver and was approved for over 100k. (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. We use that card to pay off our account at our building center and it is clear we cannot use the EIDL to pay the building center directly, so it seems to be a reasonable assumption that we could not use it to then pay for the Mastercard that paid the building center. Since the SBA doesnt spell all out all scenarios, I encourage you to check with them if you have questions about using your EIDL funds. The short answer is I dont know. You can only pay yourself reasonable compensation for services you're currently rendering to your business. Very helpful article Gerri. So before we dive into specific questions, lets look at how these loans were designed to be used. Thanks. (Remember EIDL was not the popular and extensive program it has become when COVID hit so there isnt always guidance that addresses all scenarios.) This helps. That changed. Can I payoff my car loan at once instead of paying monthly payments to save on high interest? We have lost income to ourselves as no one is wanting us in their house to clean. I applied for an EDIL loan and was approved. As long as you are using it to pay expenses that are normal working capital expenses I dont see any problem using it to pay the expenses then using EIDL to pay the credit card bill. Many people want to know, can I pay myself withe the EIDL loan? Find your local help here. Instantly, compare your best financial options based on your unique business data. Id recommend you talk with your state unemployment office. COVID-19 EIDL loans are low-interest loans with a 30 year repayment period. Hi Goodmorning I had a quick question regarding EIDL loan. Can I use a portion of my eidl loan to pay for my health insurance. Not a non-profit) 1) I received the EIDL loan in December 2020. 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. Its doubtful but I dont work for the SBA so Id suggest you check with them. Is it true that I wasnt supposed to use the funds to payoff any federal debt? (A business cash advance may be different but Id check with them.). I gotten in my eidil targeted advance loan of the 9K Months later I applied for the loan with no location. Im hanging on by a thread now. Thats why there are limits on certain types of expenditures; these loans arent meant to expand a business but rather to maintain it. My understanding is that you could make the payments on a business vehicle but not pay it off as its long-term debt. 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 the only employee and payroll myself a salary. I havent seen anything in the guidance that addresses this question. Paycheck Protection Program. 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. PPP loans are still available I am not sure I understand your comment about no fund. Thanks for your reply. Overall, the SBA approved about 3.9 million loans . Im self employedand it says show receipts, do we just save our receipts and turn them in at some point?. 2. But says, I dont have to pay him anything. I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. Hi Nic Credit cards are considered short term debt so I would imagine paying those would be fine, but I cant speak for the SBA. 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? Its all a guessing game and a crap shoot at best. I could use some of it now but I really prefer to wait until its my ablsolute last resort. Basically, I went from $165K gross receipts in 2019 to nearly $0 in 2020-21. 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. Here's how: Go to the Transactions menu. 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.. Ultimately I dont have an answer to that question as its not something detailed in the guidelines. Click the Add Transaction button. I recommend you reach out to the SBA or one of its resource partners. 1. Can I use EIDL Loan to replace an engine on a broken down work van to get it operating again? 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 ? 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. 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. 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