Unlike the Paycheck Protection Program (PPP) loan, EIDLs do not have a forgiveness aspect. Press question mark to learn the rest of the keyboard shortcuts Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant; 3. In many situations, violating an outstanding loan covenant can increase the interest rate on that loan or even cause the loan to be considered in default. In the EIDL loan documents, the SBA states it will in “its sole discretion determine whether any such compensation from other sources is a duplication of benefits.” So again, keep good records. Application Filing Deadline: December 31, 2020 . 4 0 obj Loss of anticipated profits or a drop in sales is not considered substantial economic injury for this purpose. Opinions expressed by Forbes Contributors are their own. In other words, if you're a business that sells products, you don’t need permission to sell the things you ordinarily sell. This being said, it is probably a good idea to document the state of your business and your need on or around the date you applied for the PPP loan.
However, the SBA will not consider a request for a loan increase received more than two years from the date of loan approval unless, “there are extraordinary and unforeseeable circumstances beyond the control of the borrower.”. The best path forward for many EIDL borrowers will be to pre-pay the loan once it is clear that it is probably not needed, to allow the business to “meet its obligations as they mature, or to pay its ordinary and necessary operating expenses.”. The document is 19 pages long. With the second round of funding, the money lasted just about a week before the SBA limited applications to agricultural businesses.
Lenders are working towards an easy mechanism to approve forgiveness of most loans “at the push of button” and forsake lengthy reviews. § 552. How you can check your loan status here: You would think they would have something online to enter your application #. Carranza (L) and Treasury Secretary Steven Mnuchin during a press briefing in the East Room of the White House in Washington, DC, on April 28, 2020.
Here's my timeline: 7/19: Applied, credit pull, portal, accepted offer, "Submitted Deal" status, 8/11: Received call from LO requesting images of ID, initial approval by LO, 9/5: Reassigned to new LO, LO approval revoked, status back to "Submitted Deal" (no communication for any of this; called T2 to find this out), 9/14: Found out new LO no longer with the SBA; called and emailed several SBA reps to figure out when a new LO was going to take over the app, 9/21: Received contact from LO #3, sent requested docs, portal immediately changed to $0 declined, app withdrawn because of "multiple apps submitted" (not true; only submitted 1), significantly ramped up emails and calls, now including all of my state and local elected representatives, 9/25: Received call from SBA rep, approved app and sent closing docs in 30 minutes, signed closing docs, signed up for CLS, status "Active Un-disbursed", 9/28: CLS status updated to "Disbursed Current" at 12PM Pacific (also right after verifying my mobile and landline numbers via the PIN system, though that may have been coincidental), 9/30: Funded, money in the bank at approximately 1AM, "Total Undisbursed" in CLS still showed the full loan amount, now shows $0. However, they are not accepting any new applications except from agricultural companies. It is a common complaint about the program that businesses don’t want to use the funds to pay their employees to do nothing and want to wait until they reopen or have further certainty about the shutdown. See House Passes PPP Loan Forgiveness Bill, Treasury Issues Harsh Forgiveness Regulations—What You Need To Know.
Therefore, even if your business had other sources of capital like a line of credit, it will be extremely difficult for your bank or the government to determine under those circumstances that the average business was not acting in “good faith” when showing the need for a PPP loan. (Adverse changes include, but are not limited to: judgment liens, tax liens, mechanic's liens, bankruptcy, financial reverses, arrest or conviction of felony, etc.). 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. But the advances began mysteriously showing up in applicants' bank accounts a few weeks ago, and as of last week the SBA started processing and approving applications. for services provided or to be provided in connection with applying for or closing this Loan, other than those reported on the Loan Application. The EIDL Loan process takes a minimum of 21 days to complete. If you don’t use a payroll company, then follow the outline of a Schedule C form with backup documentation to show how the money was spent. Press question mark to learn the rest of the keyboard shortcuts wow.... i thought this program was promised before Easter? While many groups are lobbying to change the allocations for how the funds should be used, it is best to assume those rules will not change. This coverage must be acquired within 12 months of obtaining the loan.
The entire United States is considered a declared disaster area because of COVID-19, but proving that the business suffered “substantial economic injury” to the point of being “unable to meet its obligations, or pay its ordinary and necessary operating expenses” may be hard to do for many businesses that have cash on hand from PPP loans that will be forgiven, as well as from other sources. All Rights Reserved, This is a BETA experience. The PPP process takes approximately 10 days to complete. ... Additionally, the SBA was completely silent for weeks on the status … We will be discussing these and other issues in a free webinar on Saturday, August 1st at 10:00 a.m. (EDT). You should reach out to your payroll provider now and start documenting these expenses. Again, the lender will make the decision on forgiveness. If the Federal creditor cannot or will not cooperate, the likely result will be a decline of the EIDL request. Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. 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. I write about tax, estate and legal strategies and opportunities.
Borrowers who received an EIDL payment should be well aware of the rules and regulations related to them. Furthermore, while this “good faith” standard does need further clarification, the fact remains that the government instituted the shutdown that every American business had to abide by. Most lenders will begin processing forgiveness applications at seven weeks from fund disbursement. EIDL Advance was a grant program offered together with the economic injury loan program. By using our Services or clicking I agree, you agree to our use of cookies. Again, your lender will be looking at the amount you spent on payroll, not who fills what job.
1 0 obj As such, it seems like a good time to revisit the EIDL program and how its loans work. Here are a couple of sections that caught my eye. Separate and apart from the Paycheck Protection Program (“PPP”) is the Economic Injury Disaster Loan (“EIDL”) program. ���r\��'����o!� ��xL��{A4�� There are three ways to check the status of your EIDL application, and all are directly through the SBA. %���� I specialize in small business policy and have run small business outreach campaigns for major organizations such as Visa, MasterCard, the U.S. Chamber of Commerce, and the U.S. Department of Commerce. A flood of applications overwhelmed the system and the SBA stopped processing the first round of EIDLs after about two weeks. No one has provided much information on how these programs complement each other yet. Additionally, you may request a loan increase for additional disaster-related damages as soon as the need for additional funds is discovered. The EIDL program is still processing applications already received. The PPP loans did not require this documentation, but put the onus on the borrower to show “good faith” that they needed the loans despite access to other sources of capital. It's best to avoid double dipping. Your bank will not check to see if you hired the same employee back, but simply that your payroll amount is the same or greater than the 2019 average upon which the loan amount was based. That variance will be converted into the two-year note at 1% interest with a six-month deferral of the first payment. See all articles by Neil Hare. Language of this certification must be incorporated into all contracts and subcontracts exceeding $100,000. Use the money upon receipt. 5 Ways to Improve Employee Communication During the COVID-19 Crisis, Newly Available CARES Act Loans: 10 Things Small Businesses Need to Know. I am also the author of two novels, An Animal Cries and God in Hell’s Kitchen. I got a copy of a Loan Authorization Agreement, Promissory Note, and Security Agreement.
In addition, the EIDL loan agreement requires the borrower to maintain hazard insurance based upon 80% of all insurable assets of the borrower. Updated June 1, 2020: The House passed the Paycheck Protection Program Flexibility Act on May 27, 2020, which attempts to ease restrictions on small businesses as they seek loan forgiveness under the Paycheck Protection Program authorized by the CARES Act. Businesses that received an EIDL loan are unable to pay dividends, even if these come from earnings having nothing to do with EIDL loan monies. It gives you the most flexibility to create the life that you want. %PDF-1.7 As of June 15, 2020, the SBA is once again accepting EIDL Advance and loan applications from all eligible borrowers. I am a board-certified estate planning and trust lawyer who practices at Gassman, Crotty & Denicolo in Clearwater, Florida. salvage (including any sale or re-use) of items of damaged property. Password. I am a writer, creative think tank member, and expert on communications and business strategy.
<> All fees not approved by SBA are prohibited. 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. I’m a sought-after speaker at business events on marketing and communications, both inside and outside the Beltway. © 2020 Forbes Media LLC. EIDL Advance does not … If possible, it is also advisable to keep PPP funds in a separate bank account and make all forgivable expenses out of this dedicated account. It is certainly of interest that the lower “necessity” standard that applies for PPP loans has been the subject of governmental and Trump administration pronouncements that borrowers are “in big trouble” if they did not satisfy the requirement, while nothing seems to have been said about this much higher EIDL loan hurdle. No. While these two reasons behind the loans were well meaning, they were misguided from the start and are now causing heartache for many small business owners.