The EIDL loan can be the saving grace for businesses and nonprofits during these COVID-19 trials. EIDL stands for Economic Injury Disaster Loans. Here’s what you need to understand about EIDL:
Purpose of EIDL: The purpose of EIDL is to help companies 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 has an impact on the forgiveness amount if you also received funds from the PPP (Paycheck Protection Program). In other words, you cannot get the PPP and EIDL Advance forgiveness or use the funds for the same expenses. I have advised my clients not to request the advance in the EIDL if they received the PPP or simply to see if they receive it, the advance will not be forgiven. Understand that the regular EIDL is a debt obligation that you are assuming and will be responsible for paying it back.
Receive the EIDL: EIDL is available to small businesses, nonprofits and agribusinesses to help them overcome 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 can be used for expenses including rent, utilities, fixed debt payments, health care benefits, accounts 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. Repaying loans to shareholders, except those made during COVID-19 due to the disaster and failing to repay them would cause undue hardship for the shareholder.
4. Acquisition of fixed assets or expansion of facilities.
5. Refinance long-term debt or cancel or cancel loans made by another entity, including the SBA.
6. Payment of fines received as a result of noncompliance 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 non-profit organizations.
The EIDL, if used as intended, will bring help to many struggling businesses and prevent them from going bankrupt, just make sure you follow the rules and don’t use it for things that are not allowed. Also note that you are putting your business assets as collateral, so read the fine print when signing the documents for the 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 is similar to the loan requirements each time you accept a business loan.
