So you got your EIDL loan approved, now what do you need to know? Hey there
everybody my name is Ryan I'm a CPA, I have my own CPA firm and I'm
here to talk about what to do after you got your EIDL loan. Not the grants but
the loan approved. But first, if you're new to this channel please subscribe. I
would really appreciate it. I'm trying to do my best to keep everybody updated
with the latest developments. And you know, I'm taking information that I'm
learning from my clients first hand and trying to pass it on to you. So please
subscribe to my channel for more updates and like my video if you think it's
helpful. Also in the comments below please be sure to leave what your
thoughts are and if you have any requests for future videos. Like if you
want to know something I'd be happy to make videos about that. I just need to
know what you guys need to know okay? What I've been hearing more and more from
people is that they're not actually getting the EIDL Advance anymore.
This is the advance up to $10,000 that you don't have
to pay back. I'm hearing from more and more people that they're not receiving
this at all. So, my guess is that the SBA is probably
lumping it together with the loan or just cutting out that process altogether.
Somebody in my last video mentioned in the comments that they think that the
SBA is doing that so that people don't just take the grants and then not loan.
So, that might be what's going on here. I'm not too sure. I will try to find out
more about that. So you got approved for the EIDL loan. What can you actually
spend it on? And this will actually depend on whether or not you also got
the PPP loan, and we'll talk about that later.
So the EIDL loan is meant to be used as working capital for your company. And
working capital is this money that you use for your day-to-day operations.
So the EIDL can be used for things like supplies, office expenses, insurance,
accounting fees, legal fees, buying inventory. You know, this regular
day-to-day operations that you need to do in order for your business
keep running. I think that's fairly straightforward. Now if you got the PPP
loan and the EIDL, you can't use them for the same things. You have to use the
PPP for payroll, utilities, rent. Whatever you're using the PPP for, you can't use
the EIDL for those same things. Now, you can use the EIDL for payroll even
if you got the PPP, but it has to be after the covered period of the PPP. So,
you know, the PPP has the covered period of eight weeks as of right now.
It looks like that's likely going to change. But as of eight weeks, you've got to
use that PPP for payroll and utilities and stuff. So, after those eight weeks,
after that covered period, you can then use the EIDL for those same expenses.
They just can't be used for the same things,
you know, simultaneously. So, what things can you not use the EIDL for? Well,
first is expansion. Anything related to expansion. And some good examples of that
are like using the money and putting it on a down payment for a second property.
Or second commercial property to grow your business. Or using as a down payment
for brand new equipment. Or improvements; major improvements to your current space.
That's not allowed. You can't use the EIDL for refinancing previous long-term
debt. So, if you already had a long-term loan, like a business loan, before the
crisis you can't just use the EIDL to refinance and pay that one off. The next
thing you can't use it for is owner bonuses. That can be considered
embezzling to the SBA. You know, you get this huge loan and you just pay yourself
a shit ton of money. That is, if you get audited by the SBA they can consider
that embezzling and you can be charged with a crime for that. And then the other
thing you can't use, or at least you've got to be very careful with, is owner
distributions. If you take normal owner distributions as part of your pay. You
know, if you take like a salary and owner distribution like some portion of either two
- as your normal pay for running the business that's okay.
But be very careful about taking extra owner distributions because that can be
considered embezzling and/or commingling. So the SBA wants to prevent you taking
that money that they loan your company and you're distributing it to yourself.
To maybe invest in the rental property for yourself. Or maybe you have business
B that you contribute that money to Business B. So now that's commingling
your money. So, don't do that. Every person that got approved for this loan may be
subject to an SBA audit. That doesn't mean that you will, it just means that
you may. So, be very careful. Keep really good records about how your loans, how
your funds are being dispersed and how they're being spent. What I really
recommend is having, and I recommend this for the PPP too, having a
separate checking account where your SBA funds are sitting in. Okay? So, they're not
just sitting in your operating accounts. Because if they're just sitting in your
operating account, then it gets kind of messy on what the funds are actually
used for. You know, because what if you do have long-term debt that you had
before this disaster. And you just have all your funds sitting in the operating
account. And you use that account to pay off your long-term debt. And you use it
to pay your rent and utilities and, you know, all your other stuff. Or that now
there could be some confusion about what your SBA EIDL loan has been
has been used to pay. So keep it in a separate account and be very intentional
about what you pay with that account, okay? And again, like the last video, I'm
going to share a little bit about my opinion. I think the EIDL is a much
more useful program than the PPP. The only problem is it's just taking so
freaking long for the SBA to roll this program out. You know, because the PPP is
meant for very specific things and those specific things contradict mandated
shutdowns. So you know, the PPP 75% for payroll
however most businesses are mandated to be shutdown. So, they're
paying their employees for what? for doing nothing.
The EIDL is more broad. You can use it for more things in general. So, I think
the EIDL is a much more useful program. Obviously you can't get it forgiven but
for businesses trying to stay alive it's a much more useful program in my opinion,
than the PPP. It's just been a shit show in terms of the SBA rolling this program
out. In one of my previous videos, we're seeing six to eight weeks before people
even see anything from the from the SBA since they applied. And I don't
think they're funding this program enough. You know, they only got $100
billion total funded towards the EIDL. And they have over $600 billion
funded towards the PPP. I don't think the EIDL is funded enough. And I think
they need a better way to get funding quicker to people. I don't know if you're
familiar with the whole application process. Or at least the history of the
application process. So, they streamlined that application starting
like March 30th 2020. Before then it was an application that probably would take
an hour or two to complete. You know, you would complete the main application form
and then you have to upload all your tax documents and your financial statements.
And you have like four or five other documents and application forms that you
had to complete and submit. And it was a very long process but it was bogging
down the SBA's system so people couldn't really get to it.
You know, you had to log in at like 2:00 a.m. in order to even get into the system to
fill out your application. So, they streamlined the application, which made it
much easier. But then they made it much more accessible to people just trying to
get the SBA grant. So we have over 3 million applications for the grants/loan
and that's what's bogging down the SBA right now. So, I think the
streamlined application was great for getting people in line. It just opened
the doors up for so many applications. It's just, I think that is hurting their
processor now. So, that's all I got for today. Be sure to LIKE this video if you
enjoyed the contents. And please Subscribe to my channel. I'll be trying
to keep you guys updated every day, hopefully. You know, when I when I first
started this channel what my intent was one video a week but that's
too slow in this climate. So, I'm trying to do this everyday. So, please like my
video. Please subscribe to my channel. Take care. I'll see you next time.