1. No Changes to the Business
Business sales or changes in ownership structure are prohibited for EIDL borrowers without prior clearance from the SBA. Changing or eliminating a business partner is one example.
2. No Distributions Outside the Usual Course of Business
Owners need SBA permission to make distributions not in the normal course of business. All financial transactions between a company and its owners, employees, or other firms are prohibited.
Funds may be dispersed in the ordinary course of business. Pass-through business structures, such as S corporations and limited liability companies, are included in this, according to the SBA.
3. Strict Record-Keeping Requirements
SBA EIDL borrowers must adhere to stringent record-keeping standards. To prove how the loan money was spent, they must preserve all relevant receipts. Each year, you must also provide the SBA with a complete set of financial and operational statements. The SBA may also choose to have an outside certified public accountant (CPA) evaluate the borrower's books at the borrower's expense.
4. Using Other COVID-19 Payments to Pay the SBA
Disaster losses not covered by other insurance policies are what EIDLs are meant to pay for. The SBA requires EIDL borrowers to report them if they get any grants, loans, insurance revenues, or litigation recoveries to assist offset losses under COVID-19. In some cases, the SBA may insist that you pay back the EIDL using this kind of funding.
But if the company doesn't plan on using the funds from each loan for the same thing, it is allowed to have both a PPP loan and an EIDL.
5. Strict Collateral Requirements
If a company needs a loan of more than $25,000, all of its assets must be put up as collateral. Inventory, machinery, cash on hand, deposit accounts, promissory notes, negotiable instruments, and future receivables all qualify as potential forms of collateral.
SBA EIDL How To Find Your Payment Portal
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