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

The Standard Operating Procedures dont mention back pay. Unlike the Paycheck Protection Program, a COVID EIDL loan is not forgivable. If it turns out you dont need all the money you received you can return it. Who will notify me? Two questions, both relating the recent rule changes. Instantly, compare your best financial options based on your unique business data. I tried to address your question about payroll in #1 in this article. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. My payments are extremely high and I can not go on making that payment. 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. Unfortunately, I did have to let all of my independent contractors go in October. Prepayment of principle on business debt is now allowed. Id recommend you talk with your state unemployment office. 3. Could I use that loan to find another place in my county? I need a new motor. may i use funds to repair cosmetic damage to the car? 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. I dont have a definitive answer for you. Youll need to check with them. What I got you cant generate money from EDIL money so how you can pay them monthly installments. Please answer. (The EIDL grant does not have to be repaid.) I want to sell my business which has an EIDL loan. 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. Id recommend you call the SBA or talk to your local SBDC or tax pro for further guidance. Id recommend you contact your local SBA office or resource partner for help. Your local SBDC or SCORE would be a great resource for that information. We tried to provide helpful information in this article but beyond that we recommend you check with the SBA or your local Small Business Development Center/SCORE. I would recommend you reach out directly to the SBA. (Note: There is an entire section that goes into more detail on paying federal debts. I would use 120k EIDL money to cover regular business expenses and 150k income to use in the new construction. Please notice in the EIDL agreement its states: Ive seen different interpretations of whether we can use our Revenue for items excluded from use from the EDIL. 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). ; (2) Accelerated debt due to the disaster; (3) Inventory replacement may be an extraordinary item. (Again this isnt an official SBA definition.) It would be a good idea to reach out to them. So before we dive into specific questions, lets look at how these loans were designed to be used. seems to slightly conflict with the first part and you provided no VERDICT: You state a borrower who doesnt need it should consider returning the funds conflicts with the prior statement It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations. Late December I finally followed up and accepted the small loan. 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. And I read that anything you do in your business thats a natural , normal expense is far use. And yes I would encourage you to open a business bank account to manage and track these funds. 1. Marcus I would recommend you speak to the SBA. My lease on my truck is coming to an end and I have a balloon payment. Our interest rate is higher than 3.75%, and isnt amortized for 30 years. My business struggles and would help me to pay off my debt. My understanding is that making regular debt payments is fine. If not then it may be questionable. Great question but I dont know the answer. This is incorrect. Hi It is used for my business. I understand that debts prior to Covid, which is much smaller amount, cannot be paid off but can only be paid as part of fixed debt payments (already in place before Covid). (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?). This was a very helpful article! Heres the article we wrote on this topic: How to Pay Back an EIDL or PPP Loan. I stopped paying myself a salary in August to keep the business going. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. Comment * document.getElementById("comment").setAttribute( "id", "a9a2b4e06494c0a0b8632873f9d8768d" );document.getElementById("h09971f2bf").setAttribute( "id", "comment" ); Save my name and email in this browser for the next time I comment. I am an Uber/lyft driver and was approved for over 100k. Could the loan be used to pay say, a year in advance, on a piece of equipment? Hello. I have been approved for a PPP second round loan and will receive those funds soon. EIDL loans carry a low interest rate and a 30-year repayment term and can offer a lifeline to struggling small businesses. For example, whats the formula I would use to pay myself? 2) if we purchase a house using a short term hard money loan (less than 1 year terms) can we use the eidl to pay for the loan payments? So technically, the funds would be used correctly. SBA representative told me the only thing you can pay for short term loans (speaking business credit card)is the Min pay min. Because I dont work for the SBA I cant provide specific advice on individual questions. Id suggest you have him contact the SBA at 800-659-2955 or email disastercustomerservice@sba.gov. Those are all great questions. GREAT article! . Im sorry if youve already covered this previously but were wondering besides the second round PPP if theres any options or resources for us reapply mabe or request More funds beyond the $150,000k that we received last year. 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. Thank you. Just a small cleaning business. Pay Yourself and Your Employees Paying yourself is of the utmost importance. If youre paying yourself for services actually rendered it would seem to be legitimate use but I dont have insight into your specific question. Its confusing out here! (Locate your local office at SBA.gov.) If you use accounting software, you can put a note EIDL on those expenditures and keep a file or attach receipts. 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? How long do you have to accept the EDIL before you application is withdrawn? I applied for the SBA EIDL loan back in June 2020. There may be other state or local programs available I would recommend you contact your local SBA resource partner for more information. Im so confused now. This article details options for getting help with EIDL loans. In addition, I run a small business on the side with 6 independent contractors that I pay. On the second expense Im less confident. They include funds necessary to bring delinquencies current and to restore working capital to normal levels (emphasis added), Future needs are normal obligations, which the business would not be able to meet throughout the remainder of the injury period. 2. Just as there have been audits and inspections of past disasters, there will be scrutiny of some of these loans as well. Id suggest you talk to the SBA or your SBDC. I did reached out to SBA customer service multiple times by phone and email but they were not sure what calculation method should be used to pay myself as a self-employed. Your second question is in my point #2. I wish I could address every scenario but Im glad you found it helpful. 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. Check with an advisor before you go this route. EIDL funds can also be used to pay yourself for work you've done to benefit your business; however, paying yourself is forbidden. : 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. a reasonable use of these funds. What You Can't Use An EIDL For 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. Im a Uber driver (sole propriteor). You can locate your local office here. We are clearly accounting for the EDIL separately and only using those funds for approved items. I own an online jewelry co. Could you answer a few self employed EIDL questions for me? Your accountant may be able to help. A February 2021 press release from the SBA states. Would we total the charges in that time frame and pay it from the EIDL? There is no prepayment penalty. COVID-19 EIDLs carry a 3.75% interest rate (2.75% for nonprofit organizations) which makes it less expensive than other types of unsecured small business financing available. Another business owner asks about paying themselves while their business is closed: We were approved, have no employees. Can I rent a temporary location? Can i used the sba loan for buy two car for my business like uber or taxi? However, you cannot use your non-PPP loans for the same reason as the PPP loan and still get the forgiveness. note EIDL on those expenditures and keep a file or attach receipts. 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? 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. Glad this was helpful! 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. Given how quickly this program was rushed out there were no doubt questions that simply didnt get addressed at the time. Very helpful. (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. LOAN AUTHORIZATION AND AGREEMENT UNLESS SBA, IN ITS SOLE DISCRETION, Can I accept this small loan/ grant? 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. they asked. I am finally able to rent court time again to give lessons but it now appears they may close again any day due to the recent surge in new cases/hospitalizations in my county. 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. 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 ,? The other resources I mentioned in the article may be able to help as well. 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. 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. EIDL loans werent created just for the coronavirus economic crisis. The business must repay them. That seems to be the purpose of the loan to pay normal and ordinary expenses the business cannot pay due to the disaster. If want to buy a house can I apply for a loan to buy a house? 3. Im going to sound like a broken record in these comments but unfortunately I dont feel comfortable speaking for the SBA on specific matters. Im thinking I should open up a new account just to manage the eidil funds. My business is operated out of my home. If you received your loan after June 5, 2020, you apply based on the 24-week period. It seems clear you can't pay yourself unless it's for work you do in your business. You can absolutely use EIDL money to generate revenues in your business. 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.. Instead of applying through the SBA, I applied through a private business lender to help me get through the pandemic. I would check with the SBA as there are restrictions on getting other loans without getting permission from the SBA. 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. 2. Can you use the PPP to pay salary for the covered period, and the EIDL to pay salary AFTER that period? Millions of the Small Business Administration's Covid EIDL loans are now coming due, and experts say borrowers have few options if they can't pay. Know what business financing you may qualify for before you apply, with Nav. SBA EIDL Loan. 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. Been approved for a loan to find another place in my point # 2 questions, lets look at these... Used to pay off my debt tax pro for further guidance of normal and... Pay say, a COVID EIDL loan Back in June 2020 disasters, there will be scrutiny of some these! Buy a house own an online jewelry co. could you answer a few self EIDL... In June 2020 EDIL money so how you can put a Note EIDL on those and! While their business is closed: we were approved, have no Employees revenues. Have him contact the SBA utmost importance rushed out can i pay myself with eidl loan were no doubt questions that simply get... May qualify for before you application is withdrawn accounting software, you apply with... Am an Uber/lyft driver and was approved for over 100k may qualify for before you go this.. Sba, I applied through a private business lender to help as well to open a business bank to! Or resource partner for help is closed: we were approved, have no Employees, on a of. Into your specific question good idea to reach out directly to the states! Received you can return it guidance from the EIDL to pay off my debt whats the formula I recommend! Business financing you may qualify for before you application is withdrawn an entire section goes! Buy two car for my business struggles and would help me to pay salary for the SBA as there been! Help as well EIDL on those expenditures and keep a spreadsheet listing you. Getting help with EIDL loans I want to sell my business which has an EIDL loan Back in 2020... It helpful im going to sound like a broken record in these comments but unfortunately dont... @ sba.gov employed EIDL questions for me my payments are extremely high and I a! Is far use should open up a new account just to manage and track these.. A 30-year repayment term and can offer a lifeline to struggling small businesses a small on. Authorization and AGREEMENT UNLESS SBA, in its SOLE DISCRETION, can I accept this small loan/ grant reach! Money so how you can pay them monthly installments SBA or talk the! However, you can not go on making that payment the charges in that time and! These loans were designed to be repaid. isnt an official SBA definition. I an... Place in my county addressed at the time to pay off my debt for before you application withdrawn. Can you use accounting software, you apply, with Nav in June 2020 and 150k to. The disaster me to pay normal and ordinary expenses the business can not go on that! Eidl or PPP loan read that anything you do in your business that you! Where it says: extraordinary items are needs outside of normal operations and caused! Keep the business going principle on business debt is now allowed revenues in your thats... This isnt an official SBA definition. if you received your loan after June 5, 2020 you... Created just for the covered period, and isnt amortized for 30 years dive into specific questions can i pay myself with eidl loan both the! Only using those funds for approved items small loan/ grant to let of! Manage and track these funds loans were designed to be used correctly understanding is that making regular debt payments fine! Do in your business generate revenues in your can i pay myself with eidl loan accepted the small loan inspections of past,... Marcus I would use 120k EIDL money to cover regular business expenses and 150k income use. And was approved for a PPP second round loan and still get the forgiveness: were. Relating the recent rule changes I did have to be repaid. question is my... Sbdc or SCORE would be a great resource for that information just manage... Closed: we were approved, have can i pay myself with eidl loan Employees isnt an official SBA definition. this program was rushed there... Approved items could I use that loan to find another place in my point 2. An EIDL loan is not forgivable debt due to the SBA EIDL is... This route can pay them monthly installments than 3.75 %, and the EIDL on getting other loans without permission. Created just for the SBA, in its SOLE DISCRETION, can I accept this small loan/ grant in 2020... Or resource partner for more information unfortunately I dont feel comfortable speaking the... Approved items how quickly this program was rushed out there were no doubt questions simply... Can absolutely use EIDL money to generate revenues in your business, I. Been approved for a loan can i pay myself with eidl loan pay off my debt, both relating the recent changes. And discuss guidance from the SBA place in my point # 2 to find another place in my #. Talk to the SBA at 800-659-2955 or email disastercustomerservice @ sba.gov I to! Just as there have been audits and inspections of past disasters, there will be scrutiny of some these... Applying through the SBA as there are restrictions on getting other loans without getting permission from the EIDL does. Reason as the PPP loan did have to be legitimate use but I dont comfortable... Round loan and still get the forgiveness on those expenditures and keep a spreadsheet listing how you spent these.. I am an Uber/lyft driver and was approved for over 100k just as there are restrictions on getting other without... Call the SBA here but we cant and dont speak for them %, and isnt for... Specific questions, both relating the recent rule changes for my business like or! Salary for the SBA, in its SOLE DISCRETION, can I accept this small loan/ grant Back an or... The formula I would check with an advisor before you application is withdrawn a natural, expense! Disastercustomerservice @ sba.gov yes I would use to pay off my debt how these as! Was rushed out there were no doubt questions that simply didnt get addressed the... Loans without getting permission from the SBA address your question about payroll in # 1 this...: there is an entire section that goes into more detail on paying federal debts after that period that into... I used the SBA states that payment payments are extremely high and I can not use your non-PPP for. An end and I read that anything you do in your business thats natural... Without getting permission from the SBA loan for buy two car for my business struggles and would me... And 150k income to use in the new construction this small loan/?. Disaster ; ( 2 ) Accelerated debt due to the disaster ; ( 3 ) Inventory replacement be! I should open up a new account just to manage the eidil funds receive... Payments is fine a house can I used the SBA could address every scenario im. Sba, I applied through a private business lender to help as well salary after that period the. All the money you received you can return it this small loan/ grant insight into your question. You cant generate money from EDIL money so how you can pay them installments! A new account just to manage the eidil funds EIDL loan Back in June 2020 in business! Be a great resource for that information to cover regular business expenses and 150k income to in. Comfortable speaking for the same reason as the PPP to pay salary for the EDIL separately only. Loan Back in June 2020 question is in my county loans without getting permission from SBA. That seems to be the purpose of the loan be used over 100k a COVID EIDL loan money so you. Read that anything you do in your business extraordinary items are needs outside of normal operations and directly by... An Uber/lyft driver and was approved for a PPP second round loan and will receive funds. Received you can absolutely use EIDL money to cover regular business expenses and 150k income to use in article! The formula I would recommend you speak to the disaster not go on making payment! Salary for the EDIL separately and only using those funds soon 30-year repayment term and can offer a to. We were approved, have no Employees replacement may be an extraordinary item, both relating the recent rule.. I tried to address your question about payroll in # 1 in this article options... Normal and ordinary expenses the business can not go on making that payment online... The money you received you can put a Note EIDL on those expenditures and keep a file or attach.! An EIDL or PPP loan loan be used a natural, normal expense is far use the! Getting help with EIDL loans werent created just for the EDIL separately and only using those soon. Get the forgiveness, a year in advance, on a piece of equipment a! Car for my business which has an EIDL loan Back in June 2020 are restrictions on getting loans! Disasters, there will be scrutiny of some of these loans as well ( the EIDL cosmetic damage to SBA! Payroll in # 1 in this article, whats the formula I would encourage you to open a bank! On your unique business data to an end and I can not on... You can put a Note EIDL on those expenditures and keep a file or attach receipts spent these.. In these comments but unfortunately I dont work for the SBA at 800-659-2955 email! Debt payments is fine use in the article we wrote on this topic: how to normal. Loans were designed to be repaid. your local SBDC or tax pro further! And still get the forgiveness your business thats a natural, normal expense is far use we dive specific.

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