If You Got the Emergency Advance, Read This - SBA Approving Economic Injury Disaster Loans (EIDLs): What You Need To Know
If your business received the EIDL advance funds of up to $10,000, you will receive an email from the Small Business Administration giving you more information to apply for the 30 year EIDL loan at 3.75%. The SBA email message looks like a loan pre-approval. The loans have flexibility in the way they can be spent, and the monthly repayment amounts are small.
The following is an excerpt from the article. Here is the link to the full article, which seriously matters.
Forbes
May 20, 2020,12:14pm EDT
SBA Approving Economic Injury Disaster Loans (EIDLs): What You Need To Know
Small businesses applied for Economic Injury Disaster Loans (EIDL) in droves when they became available on March 30th. Normally, these loans only provide assistance after natural disasters like tornadoes, wildfires or floods, but when President Trump declared Covid-19 a nationwide emergency on March 13th, the door opened for small businesses across the country to seek emergency financing. With uncertain prospects ahead, business owners saw the program’s maximum $10,000 advance as a way to tide their companies over until the effects of Covid-19 were under control.
Unfortunately, the roll out of the program was much rougher than anticipated. A flood of applications overwhelmed the system and the SBA stopped processing the first round of EIDLs after about two weeks. With the second round of funding, the money lasted just about a week before the SBA limited applications to agricultural businesses.
Additionally, the SBA was completely silent for weeks on the status of the applications that were submitted. The advances, which were supposed to be sent within three days of applying, were delayed for weeks and adjusted to $1,000/employee or a $1,000 for the self employed.
But the advances began mysteriously showing up in applicants' bank accounts a few weeks ago, and as of last week the SBA started processing and approving applications. As such, it seems like a good time to revisit the EIDL program and how its loans work.
What can you use this loan for?
Unlike the PPP loan, which can only be used for payroll, business mortgage interest, business rent or lease payments and business utility payments, EIDL loan funds can be used for a wider-range of business working capital “to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter.”
That definition is a bit vague, but the SBA has provided some additional guidance in supplemental materials. Eligible expenses include
Fixed debts (rent, etc.)
Payroll
Accounts payable
Some bills that could have been paid had the disaster not occurred.
They also provide a longer list of funds the loans cannot be used for cannot be used for
Dividends and bonuses
Disbursements to owners, unless for performance of services
Repayment of stockholder/principal loans (with exceptions)
Expansion of facilities or acquisition of fixed assets
Repair or replacement of physical damages
Refinancing long-term debt
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
Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations
Relocation (however, you can request written consent to relocate)
The following is an excerpt from the article. Here is the link to the full article, which seriously matters.
Forbes
May 20, 2020,12:14pm EDT
Brian Thompson, Contributor
Small businesses applied for Economic Injury Disaster Loans (EIDL) in droves when they became available on March 30th. Normally, these loans only provide assistance after natural disasters like tornadoes, wildfires or floods, but when President Trump declared Covid-19 a nationwide emergency on March 13th, the door opened for small businesses across the country to seek emergency financing. With uncertain prospects ahead, business owners saw the program’s maximum $10,000 advance as a way to tide their companies over until the effects of Covid-19 were under control.
Unfortunately, the roll out of the program was much rougher than anticipated. A flood of applications overwhelmed the system and the SBA stopped processing the first round of EIDLs after about two weeks. With the second round of funding, the money lasted just about a week before the SBA limited applications to agricultural businesses.
Additionally, the SBA was completely silent for weeks on the status of the applications that were submitted. The advances, which were supposed to be sent within three days of applying, were delayed for weeks and adjusted to $1,000/employee or a $1,000 for the self employed.
But the advances began mysteriously showing up in applicants' bank accounts a few weeks ago, and as of last week the SBA started processing and approving applications. As such, it seems like a good time to revisit the EIDL program and how its loans work.
What can you use this loan for?
Unlike the PPP loan, which can only be used for payroll, business mortgage interest, business rent or lease payments and business utility payments, EIDL loan funds can be used for a wider-range of business working capital “to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter.”
That definition is a bit vague, but the SBA has provided some additional guidance in supplemental materials. Eligible expenses include
Fixed debts (rent, etc.)
Payroll
Accounts payable
Some bills that could have been paid had the disaster not occurred.
They also provide a longer list of funds the loans cannot be used for cannot be used for
Dividends and bonuses
Disbursements to owners, unless for performance of services
Repayment of stockholder/principal loans (with exceptions)
Expansion of facilities or acquisition of fixed assets
Repair or replacement of physical damages
Refinancing long-term debt
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
Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations
Relocation (however, you can request written consent to relocate)
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