My review of the Economic Injury Disaster Loan from the SBA, shows there is good and bad in the loan, if you were lucky enough to get one.
1. The terms and conditions are spelled out:
a. For loans in excess of $25,000, the SBA will secured all assets of the business, making it difficult to obtain future credit. You will also need approval to sell a business asset.
b. You must provide SBA access to all books and records, and provide financial audit by CPA to SBA.
2. Restrictions on what you can do with loan proceeds. This is a working capital loan. There is a short list of what you can spend money on, and long list money of what you can’t spend it out.
3. THE GOOD — Using EIDL to pay off back taxes. WHAT? The proceeds are explicitly allowed to pay off their IRS debt over 30 years a fixed rate of 3.75%.
If you are a small business and expect the current crisis to cause 941 liability, you might plan ahead and see if you can secure a SBA loan to use to pay off back taxes.
