Businesses that applied for EIDL funding are sometimes eligible for up to a combined maximum of $15,000 in Advances. Please refer to our Advertising Disclosure to learn more about how we earn compensation from affiliate partnerships and how we maintain our independent editorial integrity. There are two parts to the EIDL program: loans and grants. The vendors that appear on this list were chosen by subject matter experts on the basis of product quality, wide usage and availability, and positive reputation. If the SBA requested reviewed financial statements, it could result in a significant cost of $6,000 or more. The $750,000 threshold includes assistance received in the form of loans. Do you need to have an audit done on your Covid-related SBA loan? Loan or Grant: A COVID EIDL loan is a loan that must be repaid. High or low debt utilization. Due to the expected high volume of incoming requests, it may be several weeks before you receive a response from SBA on next steps to follow. Notify me of followup comments via e-mail. The American Institute of Certified Public Accountants (AICPA) bylaws state that if you are an AICPA member active in the practice of public accounting, you must be associated with a firm that participates in an AICPA-approved practice-monitoring program if the firm performs services within the scope of the peer review standards and issues reports in accordance with AICPA professional standards. Accepting the EIDL may prevent you from receiving other government assistance in the future. It should have been done by the end of the fiscal year, June 30, 2020. Nor can I find a copy of the loan closing documents, to see for myself. However, if you want to take a distribution on top of the salary, you are required to make a written consent to SBA. Economic Injury Disaster (EIDL) Loans VS Paycheck Protection Program (PPP) Loans: Whats The Difference? It may be worth checking out that program, if you havent already. Because there is no financial institution as intermediary, which would do an audit, you must have one completed. These provisions greatly restrict a business owners independence in making day-to-day decisions on behalf of the business. While borrowers with loans under $25,000 do not have to guarantee collateral, those accepting larger loans need to pledge all tangible and intangible property including: These collateral conditions are more rigorous than businesses would, in most cases, face when getting a line of credit or bank loan, based on a loan of this size. Its called a single audit because thats all thats being audited the money you got, and how you spent it. IMHO, if your business is profitable, keep your net equity equal to or larger than it was at the time of assistance; or if not profitable, than not taking anything out more than reasonable wages, and you should be clear. The Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP) are providing significant relief to organizations, despite the continued confusion around forgiveness. Until the EIDL loan is paid back, owners cannot take distributions or dividends from their practice. The primary use for this loan is working capital to alleviate the economic injury caused to your business by this disaster. EIDL loans come with a 3.75% fixed interest rate for businesses and a 2.75% fixed interest rate for private nonprofits. The SBA has approved just under 3.8 million loans for about $209.7 billion, according to data through June 3. how to expedite your Targeted EIDL Advance re-disbursement, The 5 Best R&D Tax Credit Software & Tax Services, How To Claim The Research & Development Credit On Your Taxes, The Complete Guide To Understanding & Receiving The Research & Development Tax Credit, SBA Extends Deferment Period for all COVID-19 and Other Disaster Loans until 2022, Targeted EIDL Advance and Supplemental Targeted Advance, Coronavirus (COVID-19) Guides & Resources, 7 Lenders That Are Offering Second Round PPP Loans Online. They did not have the degree of Substantial Injury as the law requires when they applied and received the loans. Borrowers can opt to pay more if they are able. The first payment is due 12 months from receiving the loan. If you need the EIDL to make it through this tough time, we do not think the concerns outlined in #1 and #4 above are strong enough reasons to prevent you from using the money. Create an account to follow your favorite communities and start taking part in conversations. A source for information on applying for LOANS from the SBA's Covid-19 EIDL, reconsideration issues for declined loan applicants, and EIDL increase requests. When the SBA gave EIDL loans, they limited personal guarantees to loans over $200,000. The SBA does provide some tips on how to expedite your Targeted EIDL Advance re-disbursement. z'xwx.Ag>Rf[t9=Dk>[8B(Mr;bJ*}VbLlVd0Chas` and Kevin Cameron, CPA. We also include percentage approvals state-by-state. One thing you do not want to fall back on payments or try to dodge them I hav shears stories they have there ways of getting there money from many legal means. This is a loan that i have to pay back by the way. We have mortgages, car payments, school tuitions, and other personal expenses that have to be paid, and soon. %PDF-1.6 % An expert in accounting, finance, and point of sale, Erica has been researching and writing about all things small-business since 2018. Original EIDL Advance provided $1,000 per employee up to a maximum of $10,000 . Additionally, while EIDLs between $25,000 and $200,000 are subject to the collateral requirements, they do not require a personal guarantee. As software consulting, assuming your overhead is minimal, so risk is probably a concentrated, client-based risk. The CARES Act updated it to provide emergency grants of up to $10,000 to small businesses. The Collateral includes the following tangible and intangible personal property that Borrower now owns or shall acquire or create immediately upon the acquisition or creation thereof, including but not limited to: The Collateral section of the loan agreement also indicates that a borrower will not sell or transfer any of the collateral without written consent from the SBA, unless the collateral is inventory sold in the normal course of business. If a direct Federal debt is delinquent because of the disaster, we should make arrangements with that Federal creditor to have payments deferred or a similar action taken to bring the delinquency current prior to approval of an EIDL. You cant do the audit in house. hb```f`` vAb,;!i_Hg Yx Borrowers who received an EIDL payment should be well aware of the rules and regulations related to them. Things To Look For When Taking Out A Student Loan? Additionally, if you received a PPP loan, you cannot use EIDL funds for the same purposes until you exhaust your PPP loan. hbbd``b`$n B$ $X~H co&F) H fh EIDL grants, however, do not need to be repaid. These programs act as a crutch for individuals with red flags in their paperwork. As a form of update, I did request from the SBA how to request approval for a distribution, and received this operative paragraph: Please be advised, the LIMITS ON DISTRIBUTIONS OF ASSETS clause in your Loan Authorization and Agreement does not apply to any distribution of assets made in the normal course of business, including distributions to cover tax obligations, or distributions of net income in accordance with the bylaws or operating agreement of the company. When applying for an EIDL loan, borrowers had to state that the reason the loan was needed was due to a substantial economic injury. As set forth in longstanding SBA regulations, and as stated in the EIDL application [SEE APPLICATION], substantial economic injury generally means a decrease in income from operations or working capital with the result that the business is unable to meet its obligations and pay ordinary and necessary operating expenses in the normal course of business. Substantial economic injury is also defined in the US Code of Federal Regulations at Book 13, Code of Federal Regulations, Section 123.300, which states the following: (a) If your business is located in a declared disaster area, and suffered substantial economic injury as a direct result of a declared disaster, you are eligible to apply for an economic injury disaster loan. Things like licenses, insurance, supplies, professional fees - these are all acceptable uses of the EIDL proceeds. They are applicable only to COVID EIDL loans made through December 31, 2021. All available funds for the EIDL Advance program have been allocated. Do You Need an Audit on Your COVID Small Business Loan? To receive one, a small business first needs to apply for an EIDL loan. info@lga.cpa, Copyright 2023 LitmanGerson Associates, LLP. The SBA can provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. Overextending or underutilizing credit can be a big red flag for lenders. If lenders who have conventional loans owed by EIDL borrowers see that they are in default of their EIDL loan covenants, they may have to declare the commercial loans to be in default, which can cause a great calamity. Was just wondering what are the chances of me being audited for this small amount. This means that for businesses that repay the loan on time, they will have to keep financial statements for over 30 years. S-Corporation owners can still receive a salary, but they cannot take out money in addition to what they receive through payroll until the EIDL is paid back (without written consent from the SBA). Record Retention and Casualty Insurance Requirements. The PPP loans are from the SBA, administered through a lender. You will need to prevent personal expenses from being paid by the practice, and you cannot take distributions as outlined in #2 above. For our S-Corporation owners, this is a significant restriction. All Rights Reserved. You may opt-out by. While EIDL loans cannot be forgiven, EIDL loans do have a deferment period. Create an account to follow your favorite communities and start taking part in conversations. I cant find anyone else online interpreting as you do in #2 above. We are not sure how significant this restriction may be, but if there is another disaster, government assistance could be limited. 9. As noted above, many of the provisions that have been released restrict the independence of business owners and, if one is not too careful, may allow the SBA to essentially become a partner of the business. If you make all your payments on time, will they still bother you for any of this? Which Business Bank Account is Right For You? Based on those concerns, we believe the loan may not be a good fit for many of you for the following reasons: 2. September 01, 2021. Even then, he added, Id recommend strictly following the terms so [borrowers] can try to avoid the civil and potentially criminal penalties. He ends by stressing that the civil penalty alone can be 150% of the loan amount.. The information that is generally disclosed by the SBA includes the names of the officers and directors of the borrower, SBA awarded contracts, and the types and amounts of SBA loans. Incidentally, the PPP is designed to continue your pre-Covid rate of pay for eight weeks. NEW YORK, NY / ACCESSWIRE / April 2, 2022 / The SBA announced urgent news that has sent many small business owners scrambling. Just to be clear, you should probably be keeping all that stuff for at least 7 years to begin with. I applied on March 30th and just received my email from SBA about the EIDL loan on Monday afternoon. Additionally, banks generally only require tax returns and perhaps internal financial documentation and not a reviewed financial statement done by an independent CPA. The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. If youre truly unable to pay your loan, the SBA can take possession of your business assets things like furniture, fixtures, computers, equipment, and vehicles. Your chances of an SBA audit is about as likely as an IRS audit. They have spent loan monies on prohibited expenses. Business Credit Cards Without Personal Guarantee, Find Accounting & Payroll Software Reviews, Discover The Best Accounting & Payroll Software In 2023, Discover The Best eCommerce Platforms In 2023, Best eCommerce Platform For Small Business, Is Dropshipping Worth It? 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.