Know what the fine print means and get the ultimate checklist to track your expenses.

2 minutes read

You for the EIDL Loan, now what??

Back in March 2020, when the US government released the CARES ACT bill.

A lot of us applied for the EIDL loan, because we would be eligible for a up to $10,000 grant. [After it was released, we got the clarification that businesses could get $1,000 per employee, up to 10 employees for the grant]

Now that the loans are being granted, what does that mean?

Before you get all excited about this money [I know a lot of people are getting approved for A LOT OF money]. Let’s get to the nitty-gritty of it all.

For housekeeping: while this information is truthful and accurate, this is not legal advice. Please consult with your legal and/or financial advisor for information that fits you and your business.

If you like watching videos more than reading, watch the video below:

Let’s go to the basics on this loan:

  • This is a Federal Loan: this means, that the funds from this loan come from the Federal Government. Misappropriation of those funds is a crime – punitive with criminal prosecution.
  • Because of the item above, you need to read the entire document. Don’t sign any documents without reading and understanding it. You gotta do your work 😉
  • This low have very low-interest rates: 3.75% per annum for for-profits, and 2.75% per annum for non-profits
  • The loan amount can be as high as $2,000,000!
  • Loan repayment terms are up to 30 years (good to remember this is a very long term commitment – longer than adopting a cat!)
  • Loans payments start 12 months after the loan is granted
  • Any small business with fewer than 500 employees are eligible for this loan
  • You must keep all receipts for the expenses paid from the loan for 3 to 5 years after the loan expires (squick math: you start paying the loan 1 year after you get it, payment terms are 30 years, you must keep all the receipts for 36 years!!)

The use of EIDL funds are more broad than the PPP, but you cannot use it for anything you want.You can use the loan to:

  • Payroll Costs
  • Sick Leave
  • Accounts Payable
  • Cost of Materials
  • Rent
  • Utilities
  • Payments obligations you’re unable that you’re unable to pay (due to loss of income from the lockdown)
  • Any typical business operation expenses

You can’t use the funds for:

  • Pay bonuses and dividends
  • Disbursements to owners – unless for services rendered
  • Repayment of stockholder/principal loans (there are a few exceptions)
  • Expansion of facilities and purchase of fixed assets
  • Repair or repayment of physical damages
  • Pay off other loans (provided by any Federal Agencies, or a Small Business Investment Company)
  • Payment of any federal debt (the only exception, is if the debt is to IRS)
  • Relocation Expenses (you can request to the SBA for an exception, if they approve, then you can use the funds for this)

If you buy any equipment with the EIDL loan money, you cannot sell it. If you want to sell it, you need to connect with your legal people and request it to SBA.

Now that you understand the EIDL loan a little more, you can make better decisions and make sure you’re tracking all your expenses.