Economic Injury Disaster Loan (EIDL)-Long Term Loan Details

PPP/EIDL funding update - As of 4/20, Congress says they are close on funding the PPP an additional $250 billion and the EIDL an additional $60 billion.  Funding may occur as early as Wednesday but this is dependent on the bill being approved in the Senate and the House.  

EIDL Loan term Loan details

The long term (30 year) EIDL loan approval emails are starting to be received.  This loan is a 30 year loan with the SBA that is not a forgivable loan.  Please read the loan documents carefully before you sign.  Key language of the loans is below.

NOTE: We have heard of instances where someone logs into their EIDL account to find their maximum loan is only $15,000 which is much lower than expected.  This happened to Paula.  When she went in and checked the next morning the amount was significantly larger.  Apparently this has happened to several people. Our advice, if the loan amount you receive is $15,000 or seems much lower than expected, wait at least 24 hours and sign in again.  The loan amount may be updated for you.  

You have 2 months from the date of the loan authorization to sign and return the loan closing documents.  

I have summarized some of the key provisions of the loan below as reference only.  These are not the full terms of the agreement and you should review your loan documents before signing.

Terms

30 year term loan at 3.75% interest (2.75% for nonprofits.) Payments don't begin for 12 months after loan origination (interest still accrues.)

Use of Loan Proceeds Borrower will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter. Borrower will obtain and itemize receipts (paid receipts, paid invoices or cancelled checks) and contracts for all Loan funds spent and retain these receipts for 3 years from the date of the final disbursement. Borrower will not use, directly or indirectly, any portion of the proceeds of this Loan to relocate without the prior written permission of SBA.  The law prohibits the use of any portion of the proceeds of this Loan for voluntary relocation from the business Borrower will, to the extent feasible, purchase only American-made equipment and products with the proceeds of this Loan. Eligibility for this disaster Loan is limited to disaster losses that are not compensated by other sources. Other sources include but are not limited to: (1) proceeds of policies of insurance or other indemnifications, (2) grants or other reimbursement (including loans) from government agencies or private organizations, (3) claims for civil liability against other individuals, organizations or governmental entities, and (4) salvage (including any sale or re-use) of items of damaged property.  

Collateral

For loan amountsof greater than $25,000, Borrower hereby grants to SBA, the secured party hereunder, a continuing security interest in and to any and all “Collateral”.  The Collateral

includes the following property that Borrower now owns or shall acquire or create immediately upon the acquisition or creation thereof: all tangible and intangible personal property.

Borrower will not sell or transfer any collateral (except normal inventory turnover in the ordinary course of business) described in the "Collateral" paragraph hereof without the prior written consent of SBA.

Borrower will neither seek nor accept future advances under any superior liens on the collateral securing this Loan without the prior written consent of SBA.

Required insurance

Within 12 months from the date of this Loan Authorization and Agreement the Borrower will provide proof of an active and in effect hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Borrower will not cancel such coverage and will maintain such coverage throughout the entire term of this Loan.

Record keeping

Borrower will maintain current and proper books of account in a manner satisfactory to SBA for the most recent 5 years until 3 years after the date of maturity, including extensions, or the date this Loan is paid in full,whichever occurs first. 

Such books will include Borrower's financial and operating statements, insurance policies, tax returns and related filings, records of earnings distributed and dividends paid and records of compensation to officers, directors, holders of 10% or more of Borrower's capital stock, members, partners and proprietors.

Borrower will furnish to SBA, not later than 3 months following the expiration of Borrower's fiscal year and in such form as SBA may require, Borrower's financial statements.

Upon written request of SBA, Borrower will accompany such statements with an 'Accountant's Review Report' prepared by an independent public accountant at Borrower's expense.

EEOC Poster

If Borrower has or intends to have employees, Borrower will post SBA Form 722, Equal Opportunity Poster in Borrower's place of business where it will be clearly visible to employees, applicants for employment, and the general public

Penalties

Whoever wrongfully misapplies the proceeds of an SBA disaster loan shall be civilly liable to the Administrator in an amount equal to one-and-one half times the original principal amount of the loan.  In addition, any false statement or misrepresentation to SBA may result in criminal, civil or administrative sanctions including, but not limited to fines, imprisonment or both.

If you need to talk through specific options for your business, Molly, Paula, and I are here to help. Schedule a 30 minute consultation via Zoom where we will discuss your specific business situation for only $49.   If you have any questions, feel free to reach out to any of us.  And keep checking our emails, blog, and social media for updates.