EIDL loans and purchasing fixed assets

8 Replies

I was talking to someone and she said if a company receives any EIDL loan they cannot purchase any fixed assets during the time you have the loan outstanding. Should this be true, what happens to people who have the loan and are also in real estate? Does this mean a person or a business can no longer purchase buildings with other funds? Very confusing.

Hi @Kenny Dahill , while I'm not an attorney, accountant, etc... the paperwork that I have seen for my specific situation has not said that at all. It only says that I'm obligated to use the EIDL funds for working capital as a result of the disaster (pandemic).

I'm not sure what your source was referring to, but glad you are getting additional opinions, as that would seem contrary to economic progress and wouldn't seem to make much sense. Additionally, these loans are put on 30 year terms, so the notion of anyone expecting someone to not buy a fixed asset for 30 years doesn't seem to add up. I received a lot of good advice from my accountant who specializes in real estate, and strongly recommend you get advice from a qualified CPA/Attorney, etc.

Originally posted by @Brent Kiger :

Hi @Kenny Dahill , while I'm not an attorney, accountant, etc... the paperwork that I have seen for my specific situation has not said that at all. It only says that I'm obligated to use the EIDL funds for working capital as a result of the disaster (pandemic).

I'm not sure what your source was referring to, but glad you are getting additional opinions, as that would seem contrary to economic progress and wouldn't seem to make much sense. Additionally, these loans are put on 30 year terms, so the notion of anyone expecting someone to not buy a fixed asset for 30 years doesn't seem to add up. I received a lot of good advice from my accountant who specializes in real estate, and strongly recommend you get advice from a qualified CPA/Attorney, etc. 

 Do you have a referral for someone who specializes in EIDL for landlords/owners?

I think either you or the person you were talking to has misunderstood.

You may not use EIDL funds to purchase an asset or refinance a loan.  If you have other funds available for those purposes, you may use those.  EIDL funds are to be used for your regular business operating expenses.  The goal of EIDL loans is to keep your business afloat.

@Linda Weygant

Would you consider making mortgage payments on rentals a reasonable and intended use of the funds? Some are saying it can't be used for long-term debt, but I think they mean paying down (accelerated) or paying off completely. I'm talking about regular monthly mortgage payments.

Originally posted by @Mark S. :

@Linda Weygant

Would you consider making mortgage payments on rentals a reasonable and intended use of the funds? Some are saying it can't be used for long-term debt, but I think they mean paying down (accelerated) or paying off completely. I'm talking about regular monthly mortgage payments.

 Making a regular monthly mortgage payment would be an acceptable use.  You can't refinance or make additional principal payments on the loan.  

Originally posted by @CJ M. :

@Linda Weygant

What if I purchased a property from using other funds. Can that property still be refinanced?

Yes.  Keep good records. Everything separate and traceable from where the funds came from.