During the spring, the SBA offered practice owners an Economic Injury and Disaster Loan of up to $150k in addition to the PPP Loan of 2.5 times eligible monthly payroll costs and the EIDL Advance of $1k per employee, up to $10k. While almost all our clients accepted the PPP Loan and EIDL Advance, a small percentage took the EIDL Loan too.
As we wrote previously at: https://schwartzaccountants.com/2020/05/more-info-about-eidls/, there are certain pitfalls with the EIDL loan, so please consider paying it off as quickly as you can. We gave instructions to paying off the EIDL Loan at: https://schwartzaccountants.com/2020/10/how-to-pay-off-the-eidl-loan-2/.
Now, it appears there are even more headaches associated with maintaining this loan as the SBA is requesting additional filing requirements for businesses with an outstanding EIDL Loan as follows:
DUTY TO MAINTAIN HAZARD INSURANCE
The document that we need is the Declarations Page of your Hazard Insurance policy. This document must:
- 80% of the business contents needs to be covered
- Be current as of day of the day that I review it
- The address on the policy must match the address that we have on file for you
- The name of the insured must match the name of the Business
- The Coverage period must be 12 months
The Duty to Maintain Hazard Insurance requirement may be found on page 4 of the Loan Authorization and Agreement which you signed “…the Borrower will provide proof of an active and in effect hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Borrower will not cancel such coverage and will maintain such coverage throughout the entire term of this Loan.”
RESOLUTION OF BOARD OF DIRECTORS
The Resolution must:
- Be called the Resolution of Board (Corp), Certificate of Limited Liability Entity (LLC), or Certificate of Limited Liability Partnership (LLP) or some other such document
- Be provided by you (we cannot provide a template)
- List the Business Name
- State that a business meeting was held and specify on which date
- State that the Business has agreed to assume this SBA loan
- Specify the loan amount
- Authorize the signatory to sign on behalf of the business
- State the name of the signatory
- Be signed by corporate
The Resolution of the Board requirement may be found on page 7 of the Loan Authorization and Agreement which you signed. It states that the borrower shall “…submit the appropriate SBA Certificate and/or Resolution to the U.S. Small Business Administration…”
Please reach out to your practice attorney to property draft the required Resolution of the Board of Directors. Or, Attorney Neil Cohen can help you prepare this Resolution for $300. You can email Neil at: firstname.lastname@example.org.
Then forward the Declarations Page of your hazard insurance policy and the Resolution of the Board of Directors to the SBA per their instructions. Or, just repay the EIDL Loan if your feel your practice can afford to pay back that loan now and you aren’t overly concerned that you’ll need those funds to financially survive in the event of another forced shut down in 2021.