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Daycare and Taxes All things related to Taxes and running a Daycare post here. Topics of tax exemptions, forms, filings, tax write offs, IRS etc.

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  #1  
Old 05-15-2020, 02:51 PM
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Default EIDL Proceed Usages... and After Things are Back to Normal

Hi Everyone,

Has anyone gotten good information around how the EIDL loan can be used? I've seen some stipulations, but they generally have the disclaimer "other operating expenses" that would have been paid if the disaster had not occurred.

We were planning to fence the backyard this summer so it can be used as Daycare space. Since moving into the home we haven't been able to use it due to a pond off of our property, but too close in proximity to the yard for NYS to allow. When this hit, we decided to hold off and save money just in case, but we would consider using an EIDL for it if possible.

Then there's the question of the future as the EIDL is a 30 yr loan and one would hope we're out of this by then. In 5 years are there stipulations still how the balance can be used?

Thanks for any suggestions!
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Old 05-16-2020, 11:50 AM
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Default EIDL loan

Quote:
Originally Posted by tn0087 View Post
Hi Everyone,

Has anyone gotten good information around how the EIDL loan can be used? I've seen some stipulations, but they generally have the disclaimer "other operating expenses" that would have been paid if the disaster had not occurred.

We were planning to fence the backyard this summer so it can be used as Daycare space. Since moving into the home we haven't been able to use it due to a pond off of our property, but too close in proximity to the yard for NYS to allow. When this hit, we decided to hold off and save money just in case, but we would consider using an EIDL for it if possible.

Then there's the question of the future as the EIDL is a 30 yr loan and one would hope we're out of this by then. In 5 years are there stipulations still how the balance can be used?

Thanks for any suggestions!
The CARES ACT says the EIDL loan can be used for:
" USE OF FUNDS.—An advance provided under this sub- section may be used to address any allowable purpose for a loan made under section 7(b)(2) of the Small Business Act (15 U.S.C. 636(b)(2)), including—
(A) providing paid sick leave to employees unable to work due to the direct effect of the COVID–19;
H. R. 748—28
(B) maintaining payroll to retain employees during business disruptions or substantial slowdowns;
(C) meeting increased costs to obtain materials unavail- able from the applicant’s original source due to interrupted supply chains;
(D) making rent or mortgage payments; and
(E) repaying obligations that cannot be met due to revenue losses."

The last clause indicates that providers can use this money for any business purpose. In other words, when you have lost income and can't pay for some business expense you can use this money to pay for it.
So, you can use the money for the fence.
If you received the "advance" from EIDL that is under $10,000 you don't have to pay it back. Above that amount is a 30 years 3.75% loan.
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Old 05-17-2020, 10:38 AM
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Thanks Tom!
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Old 05-23-2020, 08:30 PM
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Hi, is that interest expense 100% deductible considering its a business loan?
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Old 05-24-2020, 10:37 AM
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Default interest

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Originally Posted by Daycarefamily View Post
Hi, is that interest expense 100% deductible considering its a business loan?
Yes, the interest is 100% deductible if you use the money exclusively for your business.
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Old 06-07-2020, 08:03 AM
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Tom, as a follow up, do you know if there is anywhere that we can reach out to get "approval" for fund usage? I'm comfortable the fence request I originally posted will be fine to use the funds for, but I'm not sure how to measure future items that we may have taken t/s% expense against. For example, we've talked about putting a fireplace in our common space, this is not a necessary purchase, but if we chose to do it, would EIDL loan money be an option to use?

I've tried calling the SBA, but the representative I spoke with said the law had to be interpreted by auditors and there wasn't any guidance they could offer over and above the language in the terms. So how can we make a reasonable estimation of what an auditor would consider a business expense?

Thank you!
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Old 06-07-2020, 10:51 AM
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Default EIDL expenses

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Originally Posted by tn0087 View Post
Tom, as a follow up, do you know if there is anywhere that we can reach out to get "approval" for fund usage? I'm comfortable the fence request I originally posted will be fine to use the funds for, but I'm not sure how to measure future items that we may have taken t/s% expense against. For example, we've talked about putting a fireplace in our common space, this is not a necessary purchase, but if we chose to do it, would EIDL loan money be an option to use?

I've tried calling the SBA, but the representative I spoke with said the law had to be interpreted by auditors and there wasn't any guidance they could offer over and above the language in the terms. So how can we make a reasonable estimation of what an auditor would consider a business expense?

Thank you!
I don't think you are going to get advance approval for how you spend EIDL money. I also doubt that the SBA will follow up and audit providers because the amounts of money are so small in comparisons with other businesses. It's clear that you can use this money for rent or mortgage payments (principal and interest). Most providers could use up all their EIDL money for this alone, given that the money can be spent over 30 years.
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Old 06-07-2020, 11:40 AM
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Thanks, Tom. That does help. I don't think I caught that the loan can be used for mortgage principle as well.
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Old 06-30-2020, 02:37 PM
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Tom,

A quick follow up question. For a mortgage payment to qualify, would it be 100% of the payment, or only the t/s% of the mortage?

Thank you
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Old 07-01-2020, 10:18 AM
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Default Eidl

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Tom,

A quick follow up question. For a mortgage payment to qualify, would it be 100% of the payment, or only the t/s% of the mortage?

Thank you
Use your time-space% of the mortgage payment.
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