Changes To The Increased $2M EIDL Loan
There are a number of changes to this loan that should be considered before application.
Personal Guarantees
These are now required on all loans above $200K.
Multiple Businesses
If you own more than one business, you can now submit multiple applications. The affiliation requirements have been simplified.
Use of Funds
This is where it gets interesting. In addition to payroll, rent / mortgage, utilities, and other normal business operating expenses, the SBA website says that it can now be used to pay debts. Not just existing debts, but, “past, present, or future.”
Before I get a bunch of emails asking for clarification, please understand that no one knows. The SBA website says, “All Debts.” Other sources are saying that it’s only commercial or federal debt. I’m sure that further clarification will be forthcoming.
Deferred Payment Period
Borrowers now have 24 months after loan origination to begin making payments.
Is It Retroactive?
Here’s the kicker. I don’t know if any of this is retroactive or not. If you received an EIDL Loan last year, does any of this apply? Again, I don’t know but probably not.
Last year you signed a loan application that was specific. Now we have these changes. No one knows if all of this applies only to the newer loans, or if it is a retroactive change to the older ones as well.
I will continue to write about this as clarifications become available.
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Let me leave you with this.
I must again renew my concerns about debt. Don’t believe for half a heartbeat that debt is good. It isn’t.
One of the concepts they teach us in finance classes is the definition between good debt and bad, Good debt is when you take out a loan to buy something that goes up in value like a home. Bad debt is when you buy something that goes down in value like a car or a boat.
What happens when you go into debt just to finance on-going operations? What do you have of value? Can it be resold? Maybe? Maybe not.
Just because you can get this money doesn’t mean that you should.
If I were you, I would think long and hard about this. $2M is an awful lot of money. You’re talking about something that could break you.
Be careful. Make sure that you have a plan, and not just any plan. One that’s extremely well thought through. I’m talking about one that’s foolproof.
Just because the SBA is nice about giving out the money doesn’t mean that they are going to be nice if they don’t get it back. Lenders don’t give out money. They only rent it because they always want it back. Be careful.
We’re all going to get through this. Let’s get through it together.
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Chris Amundson
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