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The disaster loan program existed before the pandemic. The Small Business Administration (SBA) approved over $390 billion in COVID-19 Economic Injury Disaster Loans (EIDLs) to help small businesses during the pandemic. A couple of us have gotten through with little to no wait time. Couple thoughts: Based on what you wrote: Right now Im not short of cash Do you expect you could be? I applied on March 30th and just received my email from SBA about the EIDL loan on Monday afternoon. 8. If you are unsure, please contact us and we can discuss the next steps to take. EIDL loans carry a low interest rate and a 30-year repayment term and can offer a lifeline to struggling small businesses. Found in 2018 SBA SOP manual, page 75: https://www.sba.gov/sites/default/files/2018-06/SOP%2050%2030%209-FINAL.PDF. AMOUNT AVAILABLE Six months of working capital , up to a maximum of $150,000. Ramp offers a free corporate card for virtually any business. Keep posts and comments focused on the application and reconsideration process. This data comes from the Small Business Administration, and includes lender-approved loans under the Paycheck Protection Program as of June 1, 2021.Other loan programs, such as Economic Injury Disaster Loans, are not included in this database. If youre truly unable to pay your loan, the SBA can take possession of your business assets things like furniture, fixtures, computers, equipment, and vehicles. Things To Look For When Taking Out A Student Loan? Learn about SBA EIDL loan forgiveness, repayment, and deferment options. For the last thirty years, I have primarily audited governments . endstream endobj startxref %%EOF Lenders often require collateral for small business loans. It appears that the rules pertaining to for-profit entities could differ; if a for-profit entity is already subject to a Single Audit, any funding from the EIDL would be aggregated with other federal funds received and included in your SEFA (Schedule of Federal Expenditures of Federal Awards). Again, there may be options for paying off your debt, and you wont know these options if you dont keep the lines of communication open. They have paid dividends or personal expenses for their owners. All Rights Reserved. It is important for borrowers to consult with their CPA, attorney, and banker, and to read the loan agreement carefully prior to applying. In addition to a 50% financial penalty (meaning that the amount you would have to repay the SBA is $17,250 instead of the $11,500 you received for the loan), the SBA can charge you with felony fraud. By rejecting non-essential cookies, Reddit may still use certain cookies to ensure the proper functionality of our platform. That depends on whether you got a PPP or EIDL loan. Your email address will not be published. Right now, the EIDL can cover up to six months of working capital or. The SBA offers up to a 30-year terms at a 3.75 percent interest rate for small businesses and a 2.75 percent rate for nonprofits. Erica's insights into personal and business finance have been cited in numerous publications, including MSN, View Erica Seppala's professional experience. The answer is yes only if your loan is equal or greater than $750,000. By accepting all cookies, you agree to our use of cookies to deliver and maintain our services and site, improve the quality of Reddit, personalize Reddit content and advertising, and measure the effectiveness of advertising. If that business still faces SBA loan fraud accusations, a criminal defense attorney in San Diego can assist with the legal investigation. The intent of the EIDL is to provide necessary working capital to pay for operating expenses. Lendio is one of our top picks for Business Financing! Expansion of facilities or acquisition of fixed assets; 5. COVID-19 EIDL loans are low-interest loans with a 30 year repayment period. Use r/TargetedEIDL for advance/grant issues. If you borrowed less than $200,000, this means that you likely did not sign a personal guarantee. All Rights Reserved. A great many EIDL loan borrowers will be well advised to return their EIDL loans, with interest at 3.75%, before whistleblowers become active, or governmental agents come knocking. Dear Sir, Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant; 3. thanks for your observations, I only took 24.9k so should be o.k. Havent spent a dime cause Im worried about a few specific clauses in the loan documents: Borrower will furnish to SBA, not later than 3 months following the expiration of Borrower's fiscal year and in such form as SBA may require, Borrower's financial statements.. Small loans most likely won't be targeted for auditing as long as your business has followed all the rules and you document your PPP spending. Also, there is a full personal guarantee on my loan due to amount, so moving to personal-side doesnt keep anything from SBA. When applying for an EIDL loan, borrowers had to state that the reason the loan was needed was due to a substantial economic injury. As set forth in longstanding SBA regulations, and as stated in the EIDL application [SEE APPLICATION], substantial economic injury generally means a decrease in income from operations or working capital with the result that the business is unable to meet its obligations and pay ordinary and necessary operating expenses in the normal course of business. Substantial economic injury is also defined in the US Code of Federal Regulations at Book 13, Code of Federal Regulations, Section 123.300, which states the following: (a) If your business is located in a declared disaster area, and suffered substantial economic injury as a direct result of a declared disaster, you are eligible to apply for an economic injury disaster loan. Therefore, any small business that received a Covid-19 EIDL loan should download its loan documents off the . Disclaimer: Merchant Maverick aims to provide accurate and up-to-date information to assist you in your research. 3.75% 30 year loan that is a long term liability without forgiveness. EIDL loan applications will still be processed even though the Advance is no longer available. Additionally, borrowers may not seek any advances on superior liens on the EIDL loan collateral without the written consent of the SBA. A renewal of this plan may be available for some borrowers with continued financial hardships. EIDL funds will need to be included in this total number when determining the need for a single audit, but PPP funds will not. That loan is a 30 year loan at 3.75% interest with no payments for the first year. I am fully legit, file correct taxes, etc. But simply put, SBA loans are meant to save your business, not your lifestyle. z11_`Z#u+7 If you are concerned about this, talk it over with your lender before accepting a PPP loan. As grants, SVOGs do not have to be repaid, nor do they have a forgiveness process. Another option to deflect a potential audit is through entering audit protection. The civil and criminal penalties that the SBA can levy on someone for misuse of the funds are severe. Answer: The SBA's Economic Injury Disaster Loan (EIDL) program provides small businesses with working capital loans of up to $2 million to help overcome the temporary loss of revenue. The Small Business Administration has approved $733 million for small businesses through its Targeted Economic Injury Disaster Loan Advance cash grant program just a tiny . It provides relief from economic injury caused directly by the disaster and permits you to maintain a reasonable working capital position during the period affected by the disaster. Your EIDL loan is backed by business assets. This means that theoretically, businesses will not be able to take out dividends for over 30 years if they received an EIDL loan and do not repay it in full. Just to be clear, you should probably be keeping all that stuff for at least 7 years to begin with. We might not yet be capable of repaying the entire loan principle amount. As you said in this discussion will the Dividend distribution be a problem? This is why it is important for businesses to consult with an attorney to better understand if their loan was legitimate, and if not, repay the loan as soon as possible. Do I have to pay taxes on the Targeted EIDL Advance? If, instead, you are a prior SBA borrower and they have refunded some of your prior loan payments and/or are paying some of your future payments without you having to reimburse, this is income. %PDF-1.6 % By law, SBA is not able to issue EIDL Advances once program funding has been obligated and is no longer available. 4. As of July 8, the date of its latest report, the SBA had approved 3.8 million EIDL loans for a total of $217.2 billion. This email is to confirm that we have received your request for a loan increase for the COVID-19 Economic Injury Disaster Loan (EIDL) program. The payments are labeled "SBAD TREAS 310" - which commonly denotes SBA Economic Injury Disaster Loan (EIDL) and may have the company ID of 9101036151. They are applicable only to COVID EIDL loans made through December 31, 2021. Do you need to have an audit done on your Covid-related SBA loan? It must be done by an independent auditor working for a licensed CPA firm which is enrolled in peer review. 4. Some businesses that were approved for the Targeted EIDL Advance or Supplemental Targeted Advanced never saw the funds disbursed to their bank account. An EIDL can help you meet necessary financial obligations that your business or private, non-profit organization could have met had the disaster not occurred. This plan is designed for businesses facing temporary financial hardship. Press question mark to learn the rest of the keyboard shortcuts. Borrower authorizes all Federal, State and municipal authorities to furnish reports of examination, records and other information relating to the conditions and affairs of Borrower and any desired information from such reports, returns, files, and records of such authorities upon request of SBA.. Whether you should is a judgement call. 6. What Is The PPP Direct Forgiveness Portal & Am I Qualified? We are glad to hear that the SBA has been busy notifying loan applications that their Economic Injury Relief and Disaster Loan (EIDL) has been approved. Incidentally, the PPP is designed to continue your pre-Covid rate of pay for eight weeks. We will also describe how the first $10,000 of any EIDL loan is actually considered to be a grant that does not have to be repaid, except to the extent of amounts borrowed from the PPP program. Use r/TargetedEIDL for advance/grant issues. In addition, it can be used to pay owner compensation. But if you got an EIDL (Economic Impact Disaster Loan) the answer is yes. a. Congress has been making it clear that they did not want these programs to result in any unintended burden or consequences for those benefiting from them. The start date for payments on EIDL loans has been extended. As-extracted collateral as such terms may time to time be defined in the Uniform Commercial Code. Targeted EIDL Advance, a $35 billion initiative, has been plagued with problems, from extensive delays to poor communication to plain mismanagement, according to interviews with several applicants, emails from the SBA, and hundreds of social media posts reviewed by The American Prospect. As you read on, you will see why we recommend before accepting an EIDL loan, you consult with your accountant, banker, and attorney. operating expenses that could have been met had the disaster not occurred. To receive one, a small business first needs to apply for an EIDL loan. However, you must spend your grant on approved expenditures or risk violating the terms, in which case you could be asked to repay. The collateral agreement for an EIDL loan is vigorous and will generally prevent the borrower from pledging collateral to any other lender, and may cause existing lenders to declare their loans to be in default if provisions of the existing loans prevent given collateral status to any other lender. But you are currently allowed to get the audit completed by six months after that date. For answers to specific questions, borrowers should speak with a qualified CPA and Attorney to best understand the short and long-term requirements for receiving these loans, and may want to start with an attorney who can hire the CPA to keep communications under the attorney client privilege. Another factor is who wins the election. Personally, since my businesses risk is mostly in 4Q took an EIDL early to hedge against SBA running out of funding. However, if the applicant has other resources or recoveries, we should generally allow (and perhaps require) those resources to be applied first to ineligible needs, such as the payment of direct Federal debt. 4. We will be discussing these and other issues in a free webinar on Saturday, August 1st at 10:00 a.m. (EDT). The Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP) are providing significant relief to organizations, despite the continued confusion around forgiveness. Unlike the Paycheck Protection Program, a COVID EIDL loan is not forgivable. But after the loan proceeds have been appropriately used (and before the 30 year repayment period is finished) months will go by, and the business will become profitable again, at which point we want to distribute profit to our SCorp owner. So-called Covid EIDL loans, which offer 30-year maturities and interest rates ranging from 2.75. That means that you can pay most ongoing business expenses until your business is able to open back up. If you have been approved and funded by the SBA for an EIDL. "Borrower authorizes all Federal, State and municipal authorities to furnish reports of examination, records and other information relating to the conditions and affairs of Borrower and any desired information from such reports, returns, files, and records of such authorities upon request of SBA." Does this mean copies of bank records/transactions? Be civil, helpful, and kind. The Boyer & Ritter team is keeping track of the latest information and guidance. They put resources where they have the largest return of detecting fraud and then most likely randomly hit 1-5% of smaller loan amounts just for quality control. Notify me of followup comments via e-mail. One has 20%, and the other has 15%. Further, personal home email addresses, telephone numbers, social security numbers, and birth records will remain protected. Specifically, businesses that assume larger loans need to pledge substantial collateral and, for all loans, may have to submit a reviewed financial statement.