The EIDL loan may be the saving grace for businesses and nonprofits during these difficult times of COVID-19. EIDL stands for Economic Injury Disaster Loans. Here’s what you need to know about EIDL:
Purpose of EIDL: The purpose of EIDL is to help businesses meet financial obligations and operating expenses that could have been met had the disaster not occurred. The EIDL advance is forgivable, if you did not receive the PPP, but not the full EIDL. The advance affects the amount of forgiveness if you also received PPP (Paycheck Protection Program) funds. In other words, you cannot forgive both the PPP and the EIDL Advance or use the funds for the same expenses. I have recommended to my clients that they do not request the Advance in the EIDL if they received the PPP or simply to know if they receive it, then the Advance will not be forgiven. Understand that the regular EIDL is a debt obligation that you assume and will be responsible for paying.
Receive the EIDL: EIDL is available to small businesses, nonprofit organizations, and agricultural businesses to help them during the COVID-19 pandemic. Designed to help pay bills during reduced income due to COVID-19. It can be used to provide working capital and help cover normal operating expenses. It cannot be used for the same dollars as it counts for PPP, but it can be used for expenses including rent, utilities, fixed debt payments, health care benefits, bills payable, utilities.
Also understand what it can NOT be used for:
1. Payments of dividends or bonuses.
2. Disbursements to owners, partners, officers, directors or shareholders, except when the payment is directly related to the provision of services.
3. Repayment of shareholder loans, except those that were provided during COVID-19 due to the disaster and non-repayment would cause undue hardship to the shareholder.
4. Acquisition of fixed assets or expansion of facilities.
5. Refinance long-term debt or pay off or pay off loans provided by another entity, including the SBA.
6. Payment of fines received as a result of non-compliance with a law, regulation or order of a federal, state or local agency.
7. Relocation
EIDL Refund: The term is 30 years and the rate is 3.75% for businesses and 2.75% for nonprofits.
The EIDL, if used as intended, will help a lot of businesses that are hurting and keep them from going out of business, just make sure you follow the rules and don’t use it for things that aren’t allowed. Also keep in mind that you are putting up your business assets as collateral, so read the fine print when you sign the documents for EIDL, as it clearly states that you cannot sell assets, etc., that are part of the business at the time. that accepts the EIDL. . It’s similar to the loan requirements every time you accept a business loan.
