If your business has been active since at least 2019, you undoubtedly saw some downside to commerce as a result of the pandemic. And while change and assistance were warranted in response, turning your recovery efforts over to the mercy of the federal government isn’t your only viable option.
However, if your business enlists the help of the EIDL program, long-term oversight is their answer. As we head quickly toward the December 31st application submission deadline for the SBA’s EIDL program, we thought it pertinent to further note restrictions and covenant agreements in addition to what we highlighted in our last uncovering of information.
Whose assets are they anyway?
Within the loan agreement, the borrower is not permitted to disburse any assets, personal or business, without the SBA’s consent. This is inclusive of, but not limited to: loans, gifts, or bonuses to any owner, partner of employees, or any company directly or indirectly affiliated with the borrower. If you fail to comply with this, your loan will be revoked and your assets seized to cover the remaining amount due.
So it is written, so it shall be done
If you receive a loan for $150k or more, Congress will require that the borrower may NOT use funds for lobbying purposes. Additionally, any non-federal funds used for lobbying must be self-reported and filed on Form SF-LLL. This reporting must be certified and incorporated into ALL contracts and subcontracts exceeding $100K. For many government contractors, this will be necessary for many contracts during the 30-year term of the loan. Failure to do so is a violation of the loan agreement and again will result in the forfeiture of the agreement and seizure of collateral for repayment.
Do your homework
It is essential that you thoroughly read through the entire document. It is also imperative that you compare and contrast with alternatives to be sure this is the solution that makes the most sense for your business. If you have an exit strategy that doesn’t include 30 more years of business, this program may not be the best plan for you. There are many solutions to working capital shortfalls. Be sure to do your homework, research your options, be sure you understand the obligations with the lender, and how much it is going to cost. Remember: the name of the game is making money, not spending it!