UPDATE 3/21/2021

It’s now coming up on a year from the initial posting where we shared our experience of applying for the EIDL and now we’re nearing the time where many of you are starting to think about repayment.

  • maybe you applied for the funds not knowing how last year was going to turn out and now you don’t need this big debt hanging around on your books

  • maybe you would just like to start returning the cash so you can smooth out the impact on your cash flows

  • maybe you received a letter from the SBA requesting that you start making repayments soon

Whatever the reason, here are a few tips / things to remember:

  • the EIDL (economic injury disaster loan) isn’t the same as the EIDG (the grant that came right after you applied) and the grant portion is NOT required to be repaid

  • even if you are ready to pay back the full amount you borrowed, know that interest has been accruing during the deferral period and will be added to what you owe

  • payments are deferred for 12 months, so many who received funds in April are starting to get letters setting up their first payment

  • if you’re curious about your payoff amount, you can call to find that out here: 800-659-2955

  • keep good records of the payments you’re making back on your loan—the payment portal doesn’t offer a great view of your historical activity

  • online payments can be made using pay.gov and (PRO TIP) although it doesn’t look like you can set up automatic monthly payments, if you first create a username and login for your profile, THEN you can create automatic recurring payments

  • the EIDL is also separate from the PPP loan program, so those loans (and their related forgiveness) are a completely separate deal

Good luck, and feel free to comment with any questions!

Are you a creative business owner? Let’s talk.

Original Post below from April 21, 2020

With so much uncertainty in the air about the various SBA relief programs, we wanted to take a hyper-transparent approach and share our experience with you all. While we can’t guarantee that your path will look exactly like ours, hopefully it might give you some sense of what to expect. And after just signing the documents, and seeing several surprises in there that we weren’t expecting, we wanted to share them with you right away.

On March 23rd, our EIDL loan app was submitted. On April 14th we saw the deposit of the EIDL Advance ($1k x the number of employees you have—up to $10k). Then on April 15th we received an email stating that the loan had passed an initial review and was ready to collect the final information. We were to sign off and await the preparation of loan docs. Six days later (today) we received those loan docs to sign off on. I’m not sure yet how long it will take to get funded, but we’ll update this post when that happens. [Update: One day after signing the loan docs online we had the funds in our account in full.] So 23 days from app to initial approval and another 6 days to final review and document signing. [One more day to funding.]

First, a quick note about the loan amount. The loan was for more than I thought it would be. And while there’s no official method stated for how they are determining loan amounts, the two main business numbers they ask for in this application process are total revenues and gross percentage. For what it’s worth, our loan was for 38% of annual revenues and 49% of our gross profit. If that’s helpful in giving you a gauge, great—but don’t count on it.

Here’s what you need to know about the SBA Economic Injury Disaster Loan (EIDL) terms in their loan documents:

  • Terms: 3.75% interest, 30 year repayment window, no payments for the first 12 months—no surprises there.

  • For any loan over $25k, they are securing a sort of general blanket “secured interest” or “attachment” to your assets. Which assets? Any of the following that you either own now or will acquire at any point during the loan term: inventory, equipment, investments, documents, receivables, intangible assets, etc. What does this mean? According to the document, you are not allowed to sell or transfer any of those items (other than selling your inventory as usual) without prior written consent of the SBA.

  • You’re also agreeing to pay a $100 UCC filing fee out of your proceeds.

  • You’re agreeing to keep receipts for all spending of loan funds for three years after receiving your money.

  • You cannot leave your geographic area without the SBA’s permission.

  • You have to “to the extent feasible” buy American.

  • Within 12 months of the Loan Authorization, you’ll have to provide the SBA with proof of hazard insurance covering fire, lightning, and extended coverage on all those assets we named earlier for at least 80% of their insurable value—and you’ll have to keep it for the duration of the loan term.

  • You’ll need to keep clean accounting records and allow SBA inspection at any time for up to 3 years after receiving your money (and going backward five years from any point in time).

  • There’s a very tricky clause in here that vaguely alludes to not having the resources go to the owners—or even employees, at least not in unusual ways. Here’s the exact text so you can interpret for yourself: “Borrower will not, without the prior written consent of SBA, make any distribution of Borrower’s assets, or give any preferential treatment, make any advance, directly or indirectly, by way of loan, gift, bonus, or otherwise, to any owner or partner or any of its employees, or to any company directly or indirectly controlling or affiliated with or controlled by Borrower, or any other company.”

  • You’ll need to post Equal Opportunity Employer and Client Service posters.

  • Disbursements may be made “in increments” so potentially not all at once, but not later than six months from the date of the loan docs. [Again, as an update, we received the entire loan amount in one disbursement.]

  • For loans over $150k: No using the funds for lobbying. And all the terms of this agreement have to apply to any contractors or subcontractors over $100k.

  • And last but not least, becoming delinquent in your tax filings is a potential grounds for default on this loan.

We hope this information is somewhat helpful, particularly as most of these terms weren’t made clear until you’re signing the documents. And if you just click-and-docusign away without reading carefully you could easily miss them!

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