After getting approval for the EIDL (Economic Injury Disaster Loan), Lydia began reading the terms, and what she read shocked her! So she put together this video to explain 5 terms of the loan that stood out to her as important for loan recipients to know and keep in mind before accepting the funds.
You may already know that the funds have to be used for specific business expenses. However, the terms of the EIDL could end up costing you down the line, so be aware when accepting the loan.
5 Key Takeaways Regarding Your EIDL Terms:
[5:15] Making your payments (12 month grace period), interest is accruing, even if you don’t get the full loan amount at once. You are responsible for making the payment when it’s due, even if you don’t receive your full loan amount.
[6:10] Collateral (your tangible and intangible properties, business furniture, any other assets) become collateral for the loan should you default. Not only the property you own now but potentially property you own in the future.
[9:26] Hazard Insurance. You have 12 months to get it to cover collateral (tangible and intangible property that you own now, and may own later). It is unclear if loan proceeds can be used to purchase hazard insurance.
[10:52] There is a requirement to have proper books and records and possibly a review of your books by an independent accountant.
[13:50] With all of these terms you may be in breach of contract and not even know. The penalties can be both criminal and civil.
Hiring an expert (CPA, Attorney) to help you go through the terms of your EIDL loan is a great idea, however, you may have to get permission from the SBA to do so.
Ultimately, you want to make sure you have a clear understanding of what you’re signing should you accept EIDL loans, especially those over $25,000.