In fact, theyve been part of the SBAs Disaster Loan program for many years. Disaster loans often make national headlines when a natural disaster hits an area, like when Hurricane Ian destroyed part of Florida. I am an uber driver. Our revenue is deposited into a different account. You're not alone, after doing some research I'll be answering that question in this video. 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. (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, . Hi Im a gig worker If you have questions about how you can use EIDl the SBA resource I just linked to should be able to help as well. And since you cant relocate it could be an ever bigger issue. (All of these must be related to work youre doing for the business.) Can I use EIDL to buy a vehicle for driving Uber because it is my only source of income for the last 3 years?. There is no prepayment penalty. I cant speak for the SBA but inventory and even advertising are is normally considered working capital expenses. I just knew the restrictions of how to use the EIDL loan. 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? Spending those funds on a different business could be problematic. If you have specific questions I suggest you reach out to the SBA or an SBA resource partner such as your SBA local office, SBDC or SCORE. I assume that would fall under that category but I dont work for the SBA so please reach out tot them directly to get an answer. 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. The Economic Injury Disaster Loan (EIDL) is a federal small business loan program made to support small businesses' recovery from the economic downturn caused by the COVID-19 pandemic. A certain percentage of my house payment gets written off on my taxes. Can it be used for charges put on high interest credit cards from when the pandemic started? 1. I have read about funds not being able to be used for relocation and Im wondering if you have a broader understanding of that term? Matt Id like to help but I dont work for the SBA and dont feel comfortable commenting in that level of detail. 1. Can we use a portion of the funds to get our own property, and move our operation there? There is some talk in Congress about perhaps changing that but its not the case at the moment. Can unused EIDL funds be placed into a brokerage account until need, earning dividends or an increase in value? 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. Thank you so much in advance for answering. At the same time they havent provided a lot of specific guidance on questions like yours. My business struggles and would help me to pay off my debt. Besides second draw PPP loans the main option is EIDL loans. Can I pay my self from the proceed. Youll see in the article that the SBA updated guidelines to allow for the prepayment of most debt. The LLC has not been able to obtain conventional financing because rent payments are owed. Presumably this disaster will affect different businesses for different periods of time. Can I use my loan to buy a retail space? Please let me know your thoughts. Im an owner and employee of my business. If you do, please come back and share with us what they told you. My payments are extremely high and I can not go on making that payment. Self-employed individuals can pay themselves with PPP funds, by claiming their owner compensation replacement. On the other hand, a reader who works from home wants to know if its acceptable to use EIDL to pay rent. Id encourage you to talk to the SBA, SBDC or your legal advisors. We have edited some of these questions for clarity. I still am not clear if I can accept an Economic Injury loan/grant and collect unemployment as well. Can you help ? 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. Can i used the sba loan for buy two car for my business like uber or taxi? I got approved for an edil loan can I use those funds to buy more supplies? Thanks, this was a great article, btw. In fact, theyve been part of the SBAs Disaster Loan program for many years. There is no prepayment penalty. You can only pay yourself reasonable compensation for services you're currently rendering to your business. Hi! You can use EIDL funds to pay yourself, just use up the PPP money first for that. Thank you for this article! Am I able to payoff the private loan with the EDIL funds? Find your local help here. 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. Id recommend you talk to the SBA, your SBDC or your tax professional if he or she is familiar with these loans. Would this also apply to a private live/work condo mortgage?. 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. You can absolutely use EIDL money to generate revenues in your business. My understanding is that making regular debt payments is fine. If your PPP loan is forgiven its doubtful it will report. I see no reason why you cant use EIDL to pay an employee if that employee is supporting the ongoing operations of the business during the disaster but I cant speak for the SBA. 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. 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. Based on what you are trying to do those expenses could be problematic. Similarly, paying the mortgage on your commercial property or even a rental property may be acceptable as these fall under, fixed debt payments necessary to maintain the current status of long term debts.. I applied for the SBA EIDL loan back in June 2020. Similarly, paying the mortgage on your commercial property or even a rental property may be acceptable as these fall under fixed debt payments necessary to maintain the current status of long term debts.. Can I use this to pay my light bill? Right now, our business is renting 2 units. And second, make sure you are not paying yourself with the EIDL for the same weeks that you paid yourself using the PPP. Can I buy a new t. Here's how: Go to the Transactions menu. Great question but I dont know the answer. Ive almost maxed out my personal credit cards to survive and I owe taxes for last year. It may not be permitted per points #6, 7 and 8 in this article. If you received your loan after June 5, 2020, you apply based on the 24-week period. Can I still take funds specific to dividends / draws? Do not rely on this article for specific information on how to properly spend your EIDL funds. Remember, earlier we pointed out that the SOP states: , 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.. 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. So before we dive into specific questions, lets look at how these loans were designed to be used. 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? Can I transfer this loan to the new owner. I am an Uber/lyft driver and was approved for over 100k. Is there anyway I can return my EIDL loan money after accepting and signing the document of it? What are the loan terms? Or you can reach out to the SBA if youre not sure how you can use your loan proceeds. After all, he 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.. Thanks for the kind words. If it turns out you dont need all the money you received you can return it. 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. The EIDL is a low-interest, long-term loan for small business owners that have been impacted by COVID. You can read the IFR with the expanded use of proceeds here. I have a medical issue and want to change my line of business. Please contact the SBA. 1. Payment Deferral: These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. The Interim Final Rule from the SBA describes on the first page which changes are applicable when. Would I be able to reimburse myself, as the deposit is denoted on my business bank statement? Additionally, could funds from the revenue account be invested as they are accounted for independently of all loan proceeds? I ran out of supplies due to the shortages during the pandemic. But Id check with the SBA or your tax professional about any specific questions. You may be able to get help for free from SBA resource partners. I havent seen that specific question addressed in guidance. But, I was able to keep my employees and grateful for that. The website you can use to repay your EIDL loan can be found at Pay.gov. While the SBA published some guidance describing how EIDL proceeds may be used (and has updated that over time), it never published a guide for business owners describing how to use EIDL loans. These loans offer low, fixed rates and repayment terms up to 30 years. 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