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

Thanks for the information. Use Nav to find the right accounting solution for your 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?. At the time, I couldnt find any information that indicated if the EIDG/EIDL would effect my unemployment. As a sole proprietor, I have received an EIDL loan twice. Its confusing out here! Two questions, both relating the recent rule changes. A February 2021 press release from the SBA states. Im currently not driving because of the pandemic. I spoke with SBA and their advice was to contact a lawyer because they cant give me legal advice and she put a lot of emphasis on no relocating no upgrading. Im a business with a payroll of one and lot of expenses (100% payables w/recievables of less than 10%) (Had alot of volunteers with the business. 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? 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. 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. Im sure others are wondering the same thing. (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 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. The COVID-19 pandemic was an unprecedented, nationwide disaster. Also, am I able to reimburse for utilities that I borrowed from my savings to stay afloat? I also applied for and already received funds from an EIDL earlier this month. Then, assigned Schedule C: Interest for the interest paid. Thank you very much. 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). If in doubt, you may want to ask the SBA or an SBDC advisor or SCORE mentor. She since has left the marriage and stated that she is the signatory of that loan and could not trust me to pay back the installments, Im more concerned about the legality of the moving of the funds for her sake. Heard it can be used as a forgivable loan? What You Can't Use An EIDL For Tell me what I need to do. The SBAs published guidance did not address this question. Im sorry I am not following your question. of the credit card, Also only salon phone not your cell phone. 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. Can EDIL loan be used to make repairs and pay off the mortgage? Jeff According to SBA guidelines, refinancing long-term debt is not an acceptable use of EIDL funds. Thank you. I would have had the money for this already if my business didnt suffer during Covid. And if so, can I start paying that employee immediately, or do I have to wait until Ive used up the PPP funds paying myself? I have been approved for a PPP second round loan and will receive those funds soon. In this case am I correct in thinking it could be used to pay IRS business debt? Can I buy a place with it? I have a question. Id recommend you talk to the SBA, your SBDC or a legal or tax professional familiar with this program. You may be able to get help for free from SBA resource partners. She has testified before Congress on consumer credit legislation. Is these EIDIL loans forgivable during the pandemic? I am planning to earmark EIDL funds to pay for work done by independent contractors (1099). Very helpful. I am an ber driver. I dont have a definitive answer for you. However, I do not speak for the SBA so Id recommend you contact them or a resource partner. Again we cant speak for the SBA. Our monthly rent went up. Another wrote: I am an Uber driver (independent contractor) and received a $41,000 EIDL loan as an independent contractor. The correct term is Generally Accepted Accounting Principles (GAAP). If you want to use EIDL proceeds that way, refer to page 75 of the SOP.). We have not seen any indication that will be the case. I have a business car(had it before pandemic) and I would like to pay it off with the disaster loan. For example, whats the formula I would use to pay myself? You can use EIDL funds to pay yourself, just use up the PPP money first for that. Hi Gerri, thanks for such great information. Can I use this to pay my light bill? The type of work you do to earn your pay does not appear to be restricted. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. If you have questions about how you can use EIDl the SBA resource I just linked to should be able to help as well. Im glad it was helpful. On the second expense Im less confident. Know what business financing you may qualify for before you apply, with Nav. Right now, the EIDL can cover up to six months of working. I received a PPP loan and a EDIL loan. That doesnt sound like an acceptable use but I cannot speak for the SBA. Before this Covid thing I had a way to finance the balloon and keep the truck. 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. After all, t he 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." Your local SBDC or SCORE would be a great resource for that information. In return I keep the business and pay the loans off. He wants to sell me the business for 400K. 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. Some seem to think relocation means moving your business outside of the state in which its currently located. There is also confusion about documentation required. However, being fearful of what expenses can or cannot be used, I have loaned my company several thousand in the interim to keep payroll, short term expenses and day to day expenses. 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 ? Michael Ive tried to share guidance based on the Standard Operating Procedures (SOP) for Disaster Loans which you can read here. You can always check with them. The maximum EIDL loan amount is $2 million, and the deadline to apply for these loans is December 31, 2020. I dont see why not it seems like a normal use of working capital. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. I stopped paying myself a salary in August to keep the business going. 2- Im a sole owner company (Engineering Consultation) Lets call it Business A, I partnered with another person (same business/industry) Company b can i use the money i got from SBA EIDL under business A to to pay salaries for Business b or it that consider expanding business? I do have UI but when I report even minor earnings my benefit is less than $100 for 2 weeks even with the temporary $600 from the fed so thats useless. 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. The cost of ordering summer inventory represents an additional need., Ineligible Use of EIDL Funds / What You Cannot Use EIDL On. I have a work cargo van that I use for my business. 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. Because of Covid and other business expenses, the entity requesting EIDL funds (C-corp) is behind on rent payments. A business that does not experience economic injury may want to consider returning the funds. 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. I would like to hire an employee that could bring me more business. Pay Yourself and Your Employees Paying yourself is of the utmost importance. There is no prepayment penalty but it is possible a minimal amount of interest has accrued from the time the loan was disbursed. 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. Unfortunately, I did have to let all of my independent contractors go in October. 4. If want to buy a house can I apply for a loan to buy a house? 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. I read everything on the blog so if my understanding is correct I should be able to do the following, I rent my car cost me 1K a month which includes the car insurance. However they dont detail every scenario and since I dont work for the SBA I dont feel comfortable providing specific advice. I am an independent contractor and all of my business dried up with the pandemic. EIDL loans carry a low interest rate and a 30-year repayment term and can offer a lifeline to struggling small businesses. The PPP ties into the EIDL program because businesses and organizations that received EIDLs between January 31, 2020 and April 3, 2020 have the option to refinance their EIDL into a PPP loan if they used the EIDL to cover payroll costs. The following examples come from the section of the SOP (page 186-187, abbreviated here) that relates to calculating economic injury: To-date needs are normal obligations already incurred (usually reflected as liabilities on the most recent available post-disaster balance sheet), which the business is presently unable to pay as a result of the disaster. 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. 2. Can we pay down the mortgage? Id consult with them or your tax professional for specific advice. Hello I was wondering if my companys normal business is fix and flip real estate properties , mostly single-family , is that considered proper use of the EIDL funds.. Jeff Id suggest you talk with the SBA or your tax professional. Thanks, this was a great article, btw. Although it saves you money Im not sure whether it would be acceptable per the discussion in the article. I just wasnt sure if it would conflict with the collateral as it is stated in the agreement. Who will notify me? It can be used to cover normal working capital expenses. Click the Add Transaction button. My office computer crashed. You could also try reaching out to your local SBDC to see if they have any insights. GREAT article! 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 we cant speak for the SBA so please feel free to reach out to them for any questions about acceptable use of your funds. Thank you. I need a new motor. Good morning I need help with my business not able to get in touch with anyone concerning this matter all lines are busy and my business is continually going down. Can I use this money to pay my internet bill since i need my internet. 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)., Many small business owners arent familiar with the term working capital, though, and as a result they find that description confusing. 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. Thanks again. It is in my name because my business did not have credit when I financed it. It seems clear you cant pay yourself unless its for work you do in your business. I could use some of it now but I really prefer to wait until its my ablsolute last resort. Im hanging on by a thread now. It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations.. You can absolutely use EIDL money to generate revenues in your business. I took out $30k second mortgage loan, a $10k unsecured loan and used my credit cards to survive downturn in my business during Covid. Or you can reach out to the SBA if youre not sure how you can use your loan proceeds. Thank you. Thank you so much for this clearly written article that has been of help. Im a single member LLC and recently received an EIDL loan. Overall, the SBA approved about 3.9 million loans . Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. Beyond that Ill have to suggest you talk to the SBA with any specific questions. 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. You could share this article with your accountant for their opinion. If you use accounting software, you can put a note EIDL on those expenditures and keep a file or attach receipts. You're not alone, after doing some research I'll be answering that question in this video. I have 2 questions regarding spending the EIDL Loan. The guidelines for EIDL generally can be found in this document. Thank you for all your valuable info and keeping this up to date. The Standard Operating Procedures dont mention back pay. The EIDL agreement requires any borrower accepting a loan of more than $25,000 to pledge an extensive list of collateral: "For loan amounts of greater than $25,000, Borrower hereby grants to SBA . We cant advise you specifically though it seems that generally that car payments, insurance and gas would be normal working capital expenses for an Uber driver. 1. In your article, your refer to General Accounting Principles (GAP). Marcus I would recommend you speak to the SBA. Appreciate you compiling it all for us. Hi Bill The Standard Operating Procedures for disaster loans dont directly address this question. I understand I can only pay myself from the PPP funds (based on my salary from last year), but can I use the EIDL funds to pay a newly hired employee? You can categorize the Economic Injury Disaster Loan (EIDL) as Personal Income in QuickBooks Self-Employed. SBA also is revising the regulation toclarify that COVID EIDL loan proceeds 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) or an SBIC. But, I was able to keep my employees and grateful for that. The EIDL guidelines arent specific enough for me to offer advice on individual situations. If you're using an 8-week covered period, the cap is $15,385. And an EIDL loan for self-employed people may be used to cover the following, regardless of whether it's for the self-employed person or for employees: Wages, commissions, income, or net earnings (capped at $100,000 per employee) Employee benefits (costs for vacation, family, or sick leave) Insurance premiums Retirement benefits Ive seen different interpretations of whether we can use our Revenue for items excluded from use from the EDIL. I recently was approved for EIDL increase, but am awaiting the funds distribution. These low rates have led many to ask whether they can use these funds to pay down or refinance other small business loans. I would appreciate it if you could help me or point me to someone who could. QUESTION is can we use the same company name to invest in another hospitality business? 2. For your specific question, I recommend you talk to the SBA or one of the SBA resource partners such as your Small Business Development Center. Do these rule change apply retroactively to EIDL funds already received or approved? You can also talk with your legal or financial advisors. You may want to check with the SBA. 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.. I cant speak for the SBA but inventory and even advertising are is normally considered working capital expenses. also here is the SBA Phone number 1-800-659-2955#1 for english #2 how the pandemic has effected my business. Can you help ? Fact: You can actually apply and be approved for BOTH of these programs. Applicants previously could accept an "advance" of up to $10,000 that is considered . I like to resume when situation gets little better. Can I pay myself with SBA EIDL loan? Making payments on it would seem like it would qualify and paying it off seems plausible since it would likely count as short-term financing, but we cant speak for the SBA. I am planning to pay myself by dividing my net income from Schedule C for 2019/2020 by 12. I woukd like to use the loan to continue with a establish a safe place to continue operating my family childcare in my home. Id suggest you talk with the SBA or an SBA resource partner like your SBDC if you have questions about how you can use your EIDL funds. Because I dont work for the SBA I dont feel comfortable commenting on a specific scenario Im sorry! Id recommend you either talk to the SBA or get in touch with SCORE or your SBDC to see if they have advice. So before we dive into specific questions, lets look at how these loans were designed to be used. Finally, compensation in general is limited to an annualized rate of $100,000, or $46,154 for the 24-week period. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant; Repayment of stockholder/principal loans, except when the funds were injected on an interim basis as a result of the disaster and non-repayment would cause undue hardship to the stockholder/principal; Expansion of facilities or acquisition of fixed assets; Repair or replacement of physical damages; Refinancing long term debt (SBA later made an exception here; see that change described below)). 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. My business struggles and would help me to pay off my debt. Here's how: Go to the Transactions menu. Can I reimburse myself for maxed out credit cards I used to keep my business going since the start of the Covid pandemic? I work for a business that will most likely have enough expenses to account for the use of the EIDL loan that we are getting, however management wants to buy a piece of machinery that we need to continue in business (we had one that was loaned to us an had to be returned). Please tell me if this is right or wrong.. A friend has a business he wants to sell me. Self-employed individuals can pay themselves with PPP funds, by claiming their owner compensation replacement. My accountant tells me I am OK to use the targeted advance to acquire the new shop space but Im looking for a second opinion. 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. 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. 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. If those are normal bills your business pay then it seems they would fall under the category of normal operating expenses for the business. At the same time they havent provided a lot of specific guidance on questions like yours. I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. , "What can I use the SBA EIDL loan for? (Note: There is an entire section that goes into more detail on paying federal debts. Your answer to the question Is There a Deadline to Spend EIDL Funds? 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. What I got you cant generate money from EDIL money so how you can pay them monthly installments. Can I use EIDL Loan to replace an engine on a broken down work van to get it operating again? Given how quickly this program was rushed out there were no doubt questions that simply didnt get addressed at the time. This was truly the most helpful informational I have been able to find. You dont turn in documentation automatically but you should keep careful track of how you spend EIDL proceeds in case the SBA or another governmental agency asks to review that information in the future. We have lost income to ourselves as no one is wanting us in their house to clean. I would suggest you talk to the SBA. I never filed a schedule c. Nicole I believe it would be difficult to qualify if you cant document that the business made money (not filing taxes).

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