HOW IS THE EIDL LOAN PAYMENT CALCULATED???

Question

I cannot figure out how the monthly loan payment stated in the note is calculated. It does not match up with any amortization schedule. SBA reps are clueless. Does anyone know?

Mark S. · Answer

@Tim Silvers, lots of ambiguity in the contract language. On the one hand, it’s difficult to get oneself to sign it; on the other hand, it seems like they just went overboard on the language to protect themselves and at the end of the day as long as you spend the money on normal operations of running your business, I would guess we’re all fine. There are people on here stating they’ve taken the loan and then asking “now what?” as far as what to spend it on. Crazy. My plan would be to keep the funds separate and use those funds to make normal mortgage payments (not refinance, not large principal paydowns, not acquisitions, etc.). Making those regular mortgage payments allows me to stay afloat and keep my properties. Some tenants are starting to fall behind. I don’t think we’re out of the woods yet. The question I’m essentially asking myself is whether or not I want to be a hero and put the burden solely on myself/my existing reserves if things get much worse and be “too scared” to sign documents with some strong, yet ambiguous, language, or do I want to put my big boy pants on, take it in good faith, use it for its purpose, and be glad I have it if you know what really hits the fan even worse? That’s essentially my dilemma. I have an inquiry into my mortgage officer as to whether or not taking the EIDL will hinder me from qualifying for any additional investment property loans in the future (other than the obvious change to my DTI ratio). Surely I’ll buy another rental in the next 30 years. If he gives the green light, my bias leans even further toward signing the documents.

Tim Silvers · Answer

I agree. I don't like the lien aspect of anything over $25K. Yet I know some folks don't care, they're just using it to buy whatever. I really don't know how the SBA is going to police trillions of funds, let alone being able to collect it all back over 30 years. Many people will be dead by then lol.

Tim Silvers · Answer

Thanks. Good question. Just got approved today. Will take the $1000 forgiveable loan as that's no big deal, but as far as the 3.75% loan, the agreement seems far too restrictive for landlords: "Borrower will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter..."What is considered working capital if you're a small landlord? In my case, I need it for repairs and maintenance for a couple rental houses because the property(s) ARE the business that require working capital to keep them rented.Any clarity on this?

Mark S. · Answer

@Tim SilversI ran some quick numbers and it appears to match standard time value of money (TVM) calculations (assuming deferral of interest in year 1 and then amortized over 29 years). It was within a few dollars a month of the monthly payment mentioned on the documents. Are you going to take the loan? I’m still scratching my head.

Tim Silvers · Answer

Again, let me reiterate my question: Does anyone know how the MONTHLY PAYMENT on these EIDL loans are calculated??? SBA has a bunch of morons that don't have a clue.

Tim Silvers · Answer

I just did another post about that on another thread:As a landlord, does anyone know if the EIDL loan proceeds can be used for repairs and improvements to our property(s)? This article states that, " EIDL funds can also only be used as “working capital” related to economic injury after Jan. 31. They can’t be used as capital for physical improvements..." https://www.cnbc.com/2020/05/2... A section of the actual SBA loan agreement also states: "USE OF LOAN PROCEEDS· Borrower will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter and for loans of more than $25,000 to pay Uniform Commercial Code (UCC) lien filing fees and a third-party UCC handling charge of$100 which will be deducted from the Loan amount stated above." Since tenants ARE our business customers that rely on the property(s) condition and that it is imperative for landlords to keep their properties in rentable and updated conditions in order to get tenants and keep tenants in order to generate rent, this restriction would make zero sense. Can anyone please clarify?

Raul R. · Answer

@Tim SilversSBA decides, what I suggest is apply and if you qualify you can decide to keep it or not. I received grant a couple of weeks after applying and weeks later I received noticed for loan $50k 30 years at 3.75% it’s cheap money but loan terms are strict. You can only used funds for working capital and need to keep good records and you have potential of being audited.. I have a month to decide been reading fine print..

Tim Silvers · Answer

Actually, it's the LOAN PAYMENT I need the calculation for, not the loan amount. And in my case, there is no cost of goods sold.

Edward Derosa · Answer

somebody mentioned on youtube -- "Annual gross income" minus "cost of goods sold" divided by 2