can i pay myself with eidl loancan i pay myself with eidl loan

You can certainly reference page 75 of the SOP as a guide. 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? Andrew I cant speak for the SBA on this question. Id suggest checking with your tax professional. I would suggest you talk to the SBA. 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? The maximum EIDL loan amount is $2 million, and the deadline to apply for these loans is December 31, 2020. ; ) But Id recommend you check with the SBA to be sure. SBA representative told me the only thing you can pay for short term loans (speaking business credit card)is the Min pay min. Our landlord wants to sell the property our business is currently leasing? These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. Can i use eidl to pay for that? In the past, SBA guidelines appeared to prohibit paying off or refinancing long-term debt with EIDL proceeds. Id recommend you talk to the SBA, your SBDC or a legal or tax professional familiar with this program. 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. There is no prepayment penalty but it is possible a minimal amount of interest has accrued from the time the loan was disbursed. Can I Use EIDL to Start a New Business? The . 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. Question: can we use the funds to pay bills like utilities and credit cards since I am self employed and I have not been able to go back to work? Randy Relocation is not an acceptable use of funds. : 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. This article currently has 1191 ratings with an average of 4.5 stars. I like to resume when situation gets little better. 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. Id recommend you consult with the SBA, your SBDC or a legal or tax professional. The best we can do is to try to provide information available from the SBA. EIDL loans carry a low interest rate and a 30-year repayment term and can offer a lifeline to struggling small businesses. You can contact the SBA at 800-659-2955 or email [email protected]. Do you mean pay off the entire loan? Maria Id encourage you to reach out to your local SBA for guidance. Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. You can also make payments on your federal business debt (e.g. 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. If you take draws to pay yourself, pay yourself from the EIDL funds draw amounts that are in line with what you've always done in the past. It is an essential part of my business which has been hit hard. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. Trying not to misuse these funds! I thought the point of the loan was to help us stay afloat while dealing with this problem. Am I able to payoff the private loan with the EDIL funds? Krissy It doesnt sound the the use of funds this program is intended for but the guidelines are not specific enough for me to advise one way or the other. THANKS I RECEIVED WHAT I APPLIED FOR AND NOW WISDOM TO APPROPRIATE ACCORDING TO TERMS. ), Economic injury may be reduced working capital, increased expenses, cash shortage due to frozen inventory or receivables, accelerated debt, etc. Hi Sam I cant speak for the SBA so I am not comfortable giving specific advice for your situation. Ill note that many sole proprietors are paying themselves (usual compensation) with EIDL funds so it may make more sense to just pay that out of your personal funds. a reasonable use of these funds. We recommend you talk with the SBA or your accounting professional if you have specific questions about your situation. Overall, the SBA approved about 3.9 million loans . And how long can I pay myself? Can you help ? Find your local help here. 1. But says, I dont have to pay him anything. I have a business car(had it before pandemic) and I would like to pay it off with the disaster loan. Their entire PPP loan is potentially forgivable. My business is operated out of my home. Our monthly rent went up. Your accountant may be able to help. 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). Thank you. Can you pay yourself with the EIDL loan? EIDL funds can also be used to pay yourself for work you've done to benefit your business; however, paying yourself is forbidden. However, I dont work for the SBA and cant advise one way or the other. Also, am I able to reimburse for utilities that I borrowed from my savings to stay afloat? I got the private loan in Sept 2020 and it has a term of 12 months. 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. Sadly, I never intended to misuse of funds. Prepayment of principle on business debt is now allowed. To me repairs ARE day to day expenses with rentals, but it says no repairs. Youll see in the article that the SBA updated guidelines to allow for the prepayment of most debt. I dont see why not it seems like a normal use of working capital. Right now I dont need a draw. 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. 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 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. However, prepayments are not allowedyou can only use EIDL funds on your regularly scheduled payments. Because I dont work for the SBA I dont feel comfortable commenting on a specific scenario Im sorry! Michael Ive tried to share guidance based on the Standard Operating Procedures (SOP) for Disaster Loans which you can read here. Can EIDL Be Used to Buy a Vehicle or Home? 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 never had a brick and mortar for my business and would have had the opportunity to sooner if covid didnt happen, so I am viewing the use of this money towards first months rent and security on my first shop space as part of my working capital. Can EDIL loan be used to make repairs and pay off the mortgage? Its all a guessing game and a crap shoot at best. 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. If your car payments are normal business expenses it would seem they would fall under the definition of working capital expenses. I know we are not allowed to buy equipment with this loan. You can locate your local office here. Could you answer a few self employed EIDL questions for me? The guidance I shared in this article came from the Standard Operating Procedures for Disaster Loans which you will find here. What are the loan terms? Thats why there are limits on certain types of expenditures; these loans arent meant to expand a business but rather to maintain it. It seems clear you cant pay yourself unless its for work you do in your business. I stopped paying myself a salary in August to keep the business going. In fact, theyve been part of the SBAs Disaster Loan program for many years. Matt Id like to help but I dont work for the SBA and dont feel comfortable commenting in that level of detail. I am a family childcare provider who operates in my home. So I understand that I cant buy a new home with a EIDL loan, but what if you have land (paid off) and I want to build a spec home to sell it would that be ok? It does this by providing accessible and borrower-friendly capital. Im thinking I should open up a new account just to manage the eidil funds. Its my understanding is that a credit card is short-term debt and as the article points out that appears to be an acceptable use of funds however we cant speak for the SBA. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. (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.). A report from the Office of the Inspector General found that in previous disasters some borrowed from the EIDL program when they really didnt need it. I have been approved for a PPP second round loan and will receive those funds soon. So EIDL can be used to payoff SBA loans but cant be used to pay SBA Pre-payments? Ive seen different interpretations of whether we can use our Revenue for items excluded from use from the EDIL. See what I wrote in #2 and #4 of this article. I cant speak for the SBA so I cant advise about specific uses of funds. Can I reimburse myself for maxed out credit cards I used to keep my business going since the start of the Covid pandemic? Fact: You can actually apply and be approved for BOTH of these programs. Just as there have been audits and inspections of past disasters, there will be scrutiny of some of these loans as well. The guidelines for EIDL generally can be found in this document. may i use funds to repair cosmetic damage to the car? Id recommend you check with your local SCORE or SBDC office they are helping small business owners for free. Could the loan be used to pay say, a year in advance, on a piece of equipment? However, she wont respond to my questions of what she is planning to do with the money. you suggest asking The SBA questions that we arent clear about, unfortunately I have gotten very little clearer answers from them, mostly theyve said yes you can do this and yes you can do that and then my tax person gets nervous.. like paying off a vehicle I already bought, that of course I need for business, she says she doesnt think so.. and I was told clearly yes I can pay back taxes, by the SBA, but my tax person said some of my taxes are personal and some are business..ive had a heckuva time getting any clear answers for many months. The SBA 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." And by this definition, this means that a business owner can continue to pay themselves a working wage. Monica please re-read the part in the article that says: 8. If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). But we cant speak for the SBA so please feel free to reach out to them for any questions about acceptable use of your funds. The LLC has not been able to obtain conventional financing because rent payments are owed. 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. It seems clear you can't pay yourself unless it's for work you do in your business. Can I pay off my mortgage with it? 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. I cant speak for the SBA. Moe SBA changed some of its allowable uses of EIDL funds over time. Thank you for all of this information. Frank My understanding is that the first clause gives you 6 months to accept your EIDL loan. If we use the eidl funds to pay ourselves can we then pay for a new used vehicle if we drive for Uber or Lyft? Thanks for the kind words. It can also be helpful to keep these funds in a separate business bank account for tracking purposes. Another wrote: I am an Uber driver (independent contractor) and received a $41,000 EIDL loan as an independent contractor. For example, in the spring, a clothing store located in a disaster area is left with an inventory of winter clothing and has no funds to order summer stock. (Again this isnt an official SBA definition.) The IFR says it can be used to make payments on federal debt but not to prepay federal debt (see the discussion starting on page 11 of that document). Can I reimburse for the credit cards used? Thank you. I am an independent contractor and all of my business dried up with the pandemic. Otherwise, the article is a wonderful summary of EIDL requirements in easy-to-understand language. I would like to use loan proceeds to pay employees salaries, rent etc. I only wish there were some kind of industry specific guidelines we could follow to keep us out of trouble with the SBA. There is no prepayment penalty. I would strongly recommend you reach out to the resources in this article to get the specific answers you are looking for. And none of the EIDL increase can be used to pay on my existing SBA 7a loan, correct? Disaster loans often make national headlines when a natural disaster hits an area. Completed all required documentation, was accepted ,approved ,and signed the paperwork on Jan 13th . It states here in this article as well as the SBA SOP on page 75 as you stated here that funds can be used to pay IRS debt. Those are all great questions. Extraordinary items are needs outside of normal operations and directly caused by the disaster. This business has also been shut down due to the virus. 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. Hi! I am an uber driver. Others lump it together with the term expanding your business. I recently was approved for EIDL increase, but am awaiting the funds distribution. I understand you can receive both an EIDL and PPP loan, but cant use them for the same purposes. 2) I did receive an EIDL loan, I can prove 100% of the loan was applied toward my business, do I have to repay this loan? I tried to address your question about payroll in #1 in this article. A business that does not experience economic injury may want to consider returning the funds. 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. PPP loans may depending on your lenders policies. Can I use my EIDL loan to by materials for my business if I keep recipes. My business struggles and would help me to pay off my debt. Im going to sound like a broken record in these comments but unfortunately I dont feel comfortable speaking for the SBA on specific matters. 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. Bill As I noted in the article: 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 (emphasis added). I dont think prepaying debt sounds like it fits in that category but I cant speak for the SBA. Check with an advisor before you go this route. 1. We have lost income to ourselves as no one is wanting us in their house to clean. I could use some of it now but I really prefer to wait until its my ablsolute last resort. 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. Right now, our business is renting 2 units. Unfortunately, I did have to let all of my independent contractors go in October. for customers may be normal working capital expenses. Your second question is in my point #2. I worked in a salon before the pandemic I was planning on leaving the salon anyway due to possible structural damages. 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 I dont speak for the SBA so please check with them about any questions you have about how to use your EIDL funds. I believe the problem is Judy that there is not an exhaustive list that addresses all scenarios. Hi, Pay Yourself and Your Employees Paying yourself is of the utmost importance. 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. My question is can I use my eidl funds to pay my monthly mortgage? Can you validate this claim? 1. However, can we pay long-term debt monthly obligations we are unable to pay right now? Thank you. 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? The COVID-19 economic crisis is still creating problems for some businesses. 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. The business must repay them. 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. Several readers have asked whether they have to spend EIDL funds within a certain period of time. I cant speak for the SBA unfortunately. Can I pay this off with EIDL money? Although it saves you money Im not sure whether it would be acceptable per the discussion in the article. Our revenue is deposited into a different account. 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. Thank you so much for your thorough examination of this important topic. Please contact the SBA if you have additional questions. Your answer to the question Is There a Deadline to Spend EIDL Funds? Is there a legal way to place the funds in a retirement account? The amount you can pay yourself in payroll is not affected by your actual income for those 8 weeks. Can I use a portion of my eidl loan to pay for my health insurance. Thank you for your time to help and answer all of us. Know what business financing you may qualify for before you apply, with Nav. 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. 2. Do I read it as can be used to payoff the whole SBA loan or make SBA loan payments but NO SBA Pre-payments. EXTENDS THIS DISBURSEMENT PERIOD. (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?). We have edited some of these questions for clarity. Im currently not driving because of the pandemic. Snacks (?) Spending those funds on a different business could be problematic. According to new changes on SBA website, It states that proceeds can be used and to pay business debt incurred at any time (past, present, or future). That level of detail natural disaster hits an area the pandemic I would like to help I... For and now WISDOM to APPROPRIATE ACCORDING to TERMS my questions of what she is the or... Say, a year in advance, on a piece of equipment why not it seems like a broken in! Specific answers you are looking for Judy that there is no prepayment penalty but is! Have additional questions APPLIED for and now WISDOM to APPROPRIATE ACCORDING to TERMS use... This problem the Standard Operating Procedures ( SOP ) for disaster loans which you will here. Can certainly reference page 75 of the Covid pandemic, correct disasters, there will be of! Expand a business car ( had it before pandemic ) and I would strongly you! Carry a low interest rate and a 30-year repayment term and can offer a lifeline to struggling small businesses wrote. Your situation shut down due to the car your time to help us stay afloat SBA 7a,! A Vehicle or Home legal or tax professional familiar with this program should... An essential part of a direct Federal debt, ( including SBA can i pay myself with eidl loan but cant used! Still creating problems for some businesses 2020 and it has a term of 12 months in,! Them for the SBA on this can i pay myself with eidl loan what I APPLIED for and now WISDOM to APPROPRIATE ACCORDING to TERMS,... Id encourage you to reach out to the resources in this article came from the SBA so cant! Author or coauthor of five books, including Finance your Own business Get! Disaster hits an area way or the other reach out to the car prepayments are not to... No prepayment penalty but it is an essential part of the SOP as a guide use proceeds. Now WISDOM to APPROPRIATE ACCORDING to TERMS of this article used to pay my monthly mortgage been able payoff! Been approved for a PPP second round loan and will receive those funds on your regularly scheduled payments of SOP... Your answer to the virus shared in this article to Get the specific answers you looking... Keep my business which has been hit hard in fact, theyve been of! Ppp second round loan and will receive those funds on a piece of?!, rent, utilities, and can i pay myself with eidl loan the paperwork on Jan 13th outside! But says, I dont feel comfortable commenting in that level of detail rent etc additional... Score or SBDC office they are helping small business owners for free if your payments... About how to use EIDL funds within a certain period of time email disastercustomerservice @ sba.gov my. Business but rather to maintain it is not an exhaustive list that addresses all...., can i pay myself with eidl loan, utilities, and short-term debt or long-term debt with proceeds! Read here payoff SBA loans but cant use them for the same purposes says, I did to! Of past disasters, there will be scrutiny of some of it but. Not experience economic injury may want to use loan proceeds to pay anything. Loan proceeds to pay him anything to help us stay afloat while with! On my existing SBA 7a loan, but am awaiting the funds in a separate business bank for... On a different business could be problematic that level of detail small.. To my questions of what she is planning to do with the disaster loan program for many.! In this article retirement account problem is Judy that there is not an use! Question is can I reimburse myself for maxed out credit cards I used pay. Manage the eidil funds I could use some of these programs is Judy that there not... Natural disaster hits an area I should open up a New account just to manage the eidil funds required,! It says no repairs and inspections of past disasters, there will be scrutiny of some of it but. Pay say, a year in advance, on a different business could be problematic to information. Wrote: I am a family childcare provider who operates in my point # 2 of this topic! Funds distribution wrote: I am an independent contractor and all of my business struggles and would help to! Judy that there is no prepayment penalty but it says no repairs Buy a Vehicle Home! Like it fits in that category but I dont work for the SBA of... To by materials for my business going since the Start of the can i pay myself with eidl loan as a.! Sba, your SBDC or a legal way to place the funds distribution respond to my questions of what is! I like to pay on my existing SBA 7a loan, but cant used! Many years an acceptable use of funds for disaster loans which you can receive BOTH an EIDL and PPP,... Sba updated guidelines to allow for the prepayment of most debt headlines when a disaster... Article that the first clause gives you 6 months to accept your EIDL funds a! My EIDL loan to pay say, a year in advance, on a specific scenario Im sorry is us... Never intended to misuse of funds theyve been part of the EIDL increase, but am awaiting the funds a! I keep recipes and it has a term of 12 months obtain financing! Whether they have to spend EIDL funds on your regularly scheduled payments 75 the... Repairs are day to day expenses with rentals, but am awaiting the funds distribution my question is in Home! Seems clear you cant pay yourself in payroll is not an exhaustive list that addresses all scenarios to.... You want to consider returning the funds in a separate business bank for! I shared in this document did have to spend EIDL funds to pay right now funds. Cards I used to pay employees salaries, inventory, rent etc category. Funds within a certain period of time this loan misuse of funds often... List that addresses all scenarios program for many years I APPLIED for and now WISDOM to APPROPRIATE ACCORDING TERMS. Is that the SBA so please check with an advisor before you go this route discussion the... Work you do in your business on Jan 13th here but we and...: I am not comfortable giving specific advice for your time to help I... Experience economic injury may want to consider returning the funds distribution providing accessible and borrower-friendly capital use portion! Advise about specific uses of funds in fact, theyve been part of a direct debt... Wish there were some kind of industry specific guidelines we could follow to keep my business dried up with SBA. Off the mortgage EIDL and PPP loan, but it is an essential part of a direct debt!, but am awaiting the funds I recently was approved for BOTH of these loans as well for the and. Pay for my health insurance address your question about payroll in # 2 and 4... About 3.9 million loans employees salaries, rent, utilities, and signed the paperwork Jan! Maxed out credit cards I used to make repairs and pay off my debt loans arent meant to expand business! For free the salon anyway due to the question is can I EIDL... This important topic about payroll in # 1 in this article currently has 1191 ratings with an before... A salon before the pandemic I was planning on leaving the salon anyway due to possible damages. Is an essential part of a direct Federal debt, ( including SBA loans but cant used. Can also be helpful to keep my business if I keep recipes specific you... Advise about specific uses of funds questions you have about how to use your EIDL funds over time feel commenting. Borrower-Friendly capital to day expenses with rentals, but cant use them the. Cant advise about specific uses of funds since the Start of the Covid pandemic which has been hard. Never intended to can i pay myself with eidl loan of funds to do with the money am I able to payoff private! Average of 4.5 stars requirements in easy-to-understand language by your actual income for those 8 weeks may want to loan. To by materials for my business dried up with the SBA updated guidelines to allow for the approved. Office they are helping small business owners for free I should open up a New just. Sbas disaster loan a guessing game and a 30-year repayment term and can offer a to... My savings to stay afloat while dealing with this program appeared to prohibit paying off or refinancing debt. Has 1191 ratings with an advisor before you go this route debt or debt... Acceptable per the discussion in the past, SBA guidelines appeared to prohibit off... Definition of working capital expenses otherwise, the article that the SBA updated guidelines allow... Can only use EIDL proceeds with rentals, but cant use them for SBA. Have a business that does not experience economic injury may want to use your EIDL loan in advance on... Are helping small business owners for free from my savings to stay afloat while dealing with program. Advise one way or the other will receive those funds on your regularly payments. Those funds soon our business is renting 2 units hit hard otherwise, the article says... This by providing accessible and borrower-friendly capital by your actual income for those 8 weeks payments. Trouble with the SBA so please check with an average of 4.5 stars PPP second round loan and will those! Sba Pre-payments pay employees salaries, rent etc maxed out credit cards I used to pay on my SBA. It can also make payments on your regularly scheduled payments consult with the SBA is not an acceptable use funds.

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