Preparing for EIDL Payment
This presentation provides an overview of the Streamlined EIDL program, focusing on the 30-month deferred payment period set to end soon. Understand the basics, misconceptions, and steps to prepare for making your first EIDL payment. Learn about the allowable uses of EIDL funds, collateral requirements, and potential impacts on future borrowing. Be aware of common misconceptions regarding loan forgiveness, government actions, and credit implications. Contact SBA for special circumstances or guidance on EIDL-related matters.
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Presentation Transcript
Understanding your and the steps for preparing to make your first payment. EIDL
Understanding your EIDL Outline This presentation is a review of the Streamlined EIDL (Economic Injury Disaster Loan) with an eye to the 30 month deferred payment period ending this fall. - Note: this loan program is now closed. Covered will be: The Basics The Misconceptions Your Next steps Paying off your EIDL
EIDL The Basics The Basics: The Streamlined EIDL (up to $150,000) application process opened at the beginning of April 2020. 3.75% interest for business (2.75% for non-profits) 30 year term A 30 month deferment of payments is in effect. - The 30 months began at the origination date of your loan (the date you signed the loan documents that allowed the funds to be transferred into your account). - Interest has been accruing during the deferred period. For the majority of businesses who received the Streamlined EIDL (up to $150,000) this deferment will end this fall.
EIDL The Basics The Basics Continued: The Streamlined EIDL has very specific allowable uses on what the money can be spent on (and therefore things that are not allowable). The list of those is included at the end of this PowerPoint. Collateral was required (and you agreed to it when you signed the paperwork) on loans over $25,000. - Any collateral pledged for this loan obviously may not be available to use in any other future borrowing. The program later increased the cap of the loan to $2,000,000 for eligible businesses and a personal guarantee was required on loans above $200,000. - This guarantee will be enforced and is not dischargeable by either business or personal bankruptcy.
EIDL The Basics The Basics Continued: For special circumstances (included below) contact Bham.Realty@sba.gov to request the application for SBA consent form: o a request for subordination of a lien to facilitate third-party financing o a proposed change in ownership o a proposed assumption o a request for specific collateral release. Also email Bham.Realty@sba.gov for guidance on other matters such as an anticipated business closure or liquidation.
EIDL The Misconceptions The Misconceptions: 1. This loan amount will be forgiven. IT WILL NOT. We have been repeatedly told by the SBA that there will be no forgiveness of these loans. 2. The Government will not come after me if I don t pay. THEY CAN and THEY MAY. And non-payment will affect your credit score and future ability to borrow money. 3. The banks will not look at this loan amount when considering future borrowing. THEY ABSOLUTELY WILL in fact this is the first question many banks are asking now did you get an EIDL and for how much. This amount will now (and always will until it is paid off) be considered in your debt ratio calculation and impact your future ability to borrow money.
EIDL Your Next Steps Your Next Steps: In order to know exactly what your monthly payment will be create your account in the SBACapital Access Financial System (CAFS). You will pay your loan over the remaining 27.5 years. And if you did not make any voluntary payments in the deferred period there will be a balloon payment at the end. Instructions for setting up your CAFS account are here: https://www.sba.gov/document/support-cafs-account-enrollment- access-instructions-borrowers SBA will send you a monthly bill beginning the month before the first payment is due. If you don t receive the bill it does not absolve you of responsibility to pay.
EIDL Your Next Steps Your Next Steps Continued: Use the COVID Grant and Loan Dashboard we created for you to keep track of all the monies you received from State/Local/Federal sources. This will also allow you to identify the pertinent information on your EIDL. o COVID-Grant-and-Loan-Dashboard_VtSBDC.xlsx Do a cash flow analysis of your business to make sure that you can make the payments as required. Adjust your budgeting accordingly. o You can use the VtSBDC Cash Flow Template here: Weekly-Cash-Flow-Template.xlsx o You can also contact your VtSBDC Advisor to get assistance. Keep accurate records of all of your spending from the EIDL funds (review the allowable and non- allowable uses if you have any concerns about how you are spending the money). There is the possibility of random audits. o 3 years of records must be kept on a revolving basis throughout the life of the loan (including after the last payment of the loan).
EIDL Your Next Steps Your Next Steps Continued: If you have EIDL funds left, consider pre-paying some of the loan as a mechanism to drop your monthly payment amount. o if you choose to do this at any time pre-payment of the loan requires a special process in order for it to be accounted for properly. Request a payoff amount prior to submitting payment on the 1201 Borrower Payment form by contacting the Service Office listed on your monthly 1201 Borrower Statement. Contact Bham.Realty@sba.gov for specific instructions. If you have any questions on your loan at anytime contact SBA s Customer Service Center at 800- 659-2955 (800-877-8339 for the deaf and hard of hearing) or DisasterCustomerService@sba.gov.
EIDL Paying off your EIDL Paying off your loan: There are several ways to pay off your EIDL: The preferred way is to set up your payments via Pay.gov. You will need to fill out the SBA Form 1201 Borrower Payment here: https://www.pay.gov/public/form/start/3723407 Use online bill pay through your personal banking account: o Add U.S. Small Business Administration as a payee on your personal online banking account. o Enter your 10-digit loan number as the Account Number. Note: your loan number is not the same as your application number. Loan numbers are listed on your account statements. o If you need to enter a payment address, enter P.O. Box 3918, Portland, OR 97208-3918. If you need to enter a telephone number, enter the telephone number found on the front of your statement. o Set up an electronic one-time or recurring payment using your bank s bill pay service.
EIDL Paying off your EIDL Paying off your loan continued: Mail your payment: o Make payments by check or money order, payable to the U.S. Small Business Administration. o Enter your 10-digit SBA loan number in the memo field on your check or money order. o Mail your payment to: U.S. Small Business Administration, P.O. Box 3918, Portland, OR 97208-3918.
EIDL Permitted Uses Permitted uses of EILD funds: 1. Accounts Payable 2. Inventory 3. Supplies and materials 4. Operating Expenses that would have been met prior to the crisis 5. Pay short term debt used in anticipation of disaster loan funding defined as follows: EIDL funds can be used to reimburse short term debt that was incurred while waiting for disaster assistance. Normal ongoing business expenses and debts incurred starting January 31, 2020 going forward until the disaster has been declared over, are eligible to be paid with EIDL money. 6. After PPP $ Spent or all the time if no PPP: a. Payroll Expenses b. Rent c. Utilities d. Interest on Debt 7. Payment and pre-payment of business non-federal debt incurred at any time (past orfuture) and payment of federal debt.
EIDL Non-permitted Uses Non-Permitted Use of Funds: 1. Payment of any dividends or bonuses; 2. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant; 3. Repayment of stockholder/principal loans, except when the funds were injected on an interim basis as a result of the disaster and non- repayment would cause undue hardship to the stockholder/principal; 4. Expansion of facilities or acquisition of fixed assets; 5. Repair or replacement of physical damages; 6. Refinancing long term debt; 7. Paying down (including regular installment payments) or paying off loans provided, or owned by another Federal agency (including SBA) or a Small Business Investment Company licensed under the Small Business Investment Act. Federal Deposit Insurance Corporation (FDIC) is not considered a Federal agency for this purpose; 8. Pay any penalty resulting from noncompliance with a law, regulation or order of a Federal, state, regional, or local agency. 9. Contractor malfeasance 10.Relocation.
EIDL Additional Information and Assistance For complete information on the EIDL visit the SBA website: https://www.sba.gov/funding-programs/loans/covid-19-relief- options/eidl The VT SBA is also ready to assist: https://www.sba.gov/offices/district/vt/montpelier And as always we are here to help so if you have additional questions contact your VtSBDC Area Advisor. https://www.vtsbdc.org/meet-our-team-2/ Please note that all information offered here is up to date as of June 2022. If changes are made by the SBA regarding payment of the EIDL we will let you know.
