It appears as though the SBA is ramping up issuance of the Economic Injury Disaster Loans (EIDL). And although the requirements for how the proceeds from the EIDLs are spent do not appear as restrictive as how the proceeds from the Paycheck Protection Program are spent, there are a few things to keep in mind.
First, some background:
The EIDL is a more traditional type of loan facility. There is no forgiveness of the EIDL
Collateral may be required, depending on the amount (generally for EIDLs greater than $25,000)
There is a 12 month deferral period before payments begin (interest accrues during the 12 months)
The interest rate on the EIDL is 3.75% and the repayment term is 30 years
Approved uses include rent, utilities, payroll, accounts payable and some bills that could have been paid had the disaster (in this case Covid-19) not occurred
And now the fine print:
The EIDL provides an advanced grant of $1,000 per employee (up to $10,000). As a grant, it won't have to be paid back. However, it will be subtracted from the Paycheck Protection Program loan forgiveness
You can't use the PPP loan and the EIDL for the same purpose. For example, you can't use the EIDL to cover a portion of the payroll for certain workers and the PPP loan to cover another portion of the payroll for the same workers
The EIDL may NOT be spent on A. Relocation B. Expansion of facilities or acquisition of fixed assets C. Dividends and bonuses D. Disbursements to owners, especially when related to the performance of services E. Repayment of stockholder/principal loans F. Repair or replacement of physical damages G. Refinance of long term debt
By accepting the EIDL, you authorize the SBA to make inspections of your books and records
The SBA may require an "Accountant's Review" to be completed of your books and records. An "Accountant's Review" generally costs about $5k - $6k per year.
We hope you found the above helpful. And again, we are available if you have questions, concerns or need assistance.