, IRS’s explanation under “Capitalized interest”, You are the legally liable person for the loan, You’ve made an agreement with the lender to repay the loan, You and your lender have a “true debtor-creditor relationship”, You can’t deduct interest paid using funds from a 2nd loan (refinancing) to pay off your 1st loan, You can’t deduct interest payments if you assumed debt or property from an original owner—these will be depreciated, You can’t deduct capitalized interest (see the, You can’t deduct interest payments made on fees intended to be used on a standby basis. So, you won’t be taxed for the principal amount. Once the SBA finalizes the application process (expected during the week of March 30-April 3), SBA lenders will know what other information will be required for PPP Loans. Step 3. Our site is Paying yourself from EIDL funds is a source of confusion for … Under the Paycheck Protection Program (PPP) Loan, in addition to small business concerns eligible for SBA loans, eligible entities include businesses, 501(c)(3) nonprofit organizations, veterans organizations, or Tribal business concerns with 500 or fewer employees (including full-time and part-time employees), which number may be increased for certain industries that are subject to higher employee thresholds as set forth in the SBA’s size standard tool. Depending on the type of loan, it can be used for a range of purposes, such as buying equipment, real estate or inventory. These government-backed term loans provide you with a large cash sum with low interest rates, manageable payment terms, and flexible spending. Borrowing Procedures: In order to apply a PPP Loan, the act requires a borrower must make a good faith certification that the loan is necessary in light of the current economic conditions, an acknowledgement that the funds will be used for the outlined purposes, and that it does not have other applications or has not received any funds for other PPP Loans. • The Paycheck Protection Program loan proceeds must be used for eligible purposes according to guidance and some or all of the loan may be forgiven if used properly. Visit the SBA’s website to learn more about applying for an EIDL. Many commentators have noted that the $349 billion allocated for the PPP Loan program likely will not satisfy the demand, so it is important for business to make contact with an approved SBA lender as soon as possible. However, using the loan can also reduce how much you can write off on your business taxes, so keep that in mind when applying for the loan. Through Dec. 31, 2020, any business with 500 or fewer employees may apply directly to the SBA for an EIDL in response to COVID-19. But, business loan tax deductions make borrowing a little less scary. With this program, you can borrow up to $10 million and get up to your full loan amount reimbursed if you keep your employees on salary and spend the funds on eligible expenses. This means you can claim larger business loan interest tax deductions when you start your loan payments, and this helps offset your new debt. May 22nd, 2020. Lenders are required to provide deferral of all principal, interest and fees for PPP Loans for at least six months, up to a period of one year. If the business already received an Economic Injury Disaster Loan (EIDL) on or after Jan. 31, 2020, it may refinance and convert the EIDL to a Section 7(a) loan using the proceeds from the PPP Loan. But applying and getting approved for an SBA loan can require extensive documentation. accepting representation. If it is not okay, the worst case scenario seems to be that you will have to pay back the loan at 1% for paying income taxes that you owed anyway. Pursuant to the act, the amount forgiven will not create income tax. Your interest payments, however, are a tad different. You won’t save as much as you deduct, but making small business loan payments tax deductible is still a significant economic boost. EIDLs are low-interest loans with a maximum maturity of 30 years—determined by your lender. Payroll costs are defined in the act to include: salary, wages, commission, or similar compensation; payment of cash tips or equivalent; payment for vacation, parental, family, medical or sick leave; allows for dismissal or separation; payments for providing group healthcare benefits, including insurance premiums; payments for retirement benefits; and payments of state or local taxes assessed on the compensation of employees. He's created and managed content for startups, growth-stage companies, small businesses and publicly-traded businesses. The lender must make a decision regarding qualification for forgiveness within 60 days after its receipt of the application for forgiveness. This deferral period should give businesses and lenders time to determine the amount of any loan forgiveness. The interest rate is 3.75% for businesses and 2.75% for nonprofits. The first payment on the economic injury loan issued due to the coronavirus will be automatically deferred for one year. When you’re paying one off, you can likely deduct the interest you pay from your taxes. So you may want to consult with a tax professional if you’re unsure about the validity of a deduction. Before a business begins allocating funds to the various expenses that are piling up, it's important to note that the SBA states, "These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can't be paid because of the disaster's impact." The only significant downside to an SBA 7(a) loan is the intensive paperwork and processing—but since we can help streamline that for you, this loan really is a win-win. The SBA affiliation rules are very broad, and affiliation is determined based on a wide-range of methods of control, as determined by the SBA, including more than 50 percent ownership; significant minority ownership vis-à-vis other minority owners; certain voting/contractual veto, approval, or other similar rights; or managerial control. So we’re breaking down what you need to know here. The SBA’s disaster loans can help you pay for just about anything you need to afford after a disaster. 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can you use sba loan to pay taxes

Should you choose to contact an attorney at Barnes & Thornburg LLP (via The act authorizes an additional $10 billion for such loans. A business receiving a PPP Loan is eligible for forgiveness of the loan in an amount equal to the payroll costs, interest on a mortgage, rent, and utility payments incurred during the eight-week period starting from the date of the loan. All Rights Reserved. By using the EIDL loan to pay the tax, borrowers can use their savings (which they would have used to pay taxes) to pay other debt, such as credit card debts or other debts. The Internal Revenue Service will take action if your bill is left unpaid; you’ll incur … The business must also provide an officer’s certificate acknowledging that the presented documentation is true and the amount of requested forgiveness was used to retain employees and for other qualified purposes. There are always exceptions when it comes to taxes. For any employee whose compensation is greater than $100,000 on an annualized basis, that portion in excess of $100,000, on a prorated basis, is excluded from the determination of “payroll costs.”, Self-employment income or compensation for sole proprietors and independent contractors, subject to a similar $100,000 limitation, are included in “payroll costs.”. Extra Fees. inquiries or information received by Barnes & Thornburg LLP will not be regarded Below, we’ll cover all the nitty-gritty tax details around the question: “are business loans tax deductible?” Doing so will help you pay exactly what you owe and collect what you’re due, too. Q: Can I get the $10,000 EIDL Advance, the EIDL Loan and the PPP Loan? A third party lender, such as Wells Fargo, comprises the lending institution and the SBA guarantees a portion of the loan in the event of default. The loans cannot be used to refinance debts incurred prior to COVID-19, to pay other federal loans, tax penalties or civil/criminal fines. If you owe money to the IRS and can’t afford to pay, you may be considering taking out a personal loan to pay taxes. implications of communicating with Barnes & Thornburg LLP and agree to the following terms. Whether you’re suffering from lost revenue or any other crisis, there’s a solution to get you back on your feet: an SBA 7(a) loan. to be confidential until the attorney verifies that the firm does not represent other When it comes to IRS obligations, there are a few subtle nuances to your SBA loans. Copyright © 2019 Funding Circle Limited. Fortunately for you, SBA 7 (a) loans are term loans (the only difference is they’re guaranteed by the SBA).This means you can deduct your interest payments. This immediate capital injection can also be used to supply your business with the cash flow it needs for any immediate uses while you wait for your expedited SBA loan. Apply for your SBA loan. This means you can write off your interest payments as business expenses and lower your overall tax burden. Before sending mail to your intended recipient, you must first understand the Finally, the act protects individual business owners by eliminating any personal recourse that the SBA may have against any individual owner except to the extent the funds are used for an unauthorized purpose. When someone receives a loan, often any payments for the principle or interest provide a reduction in taxes based on how much was paid in during the year. Use these funds to pay off your tax lien and/or judgement. Can I Use EIDL Funds to Pay Myself? This Barnes & Thornburg LLP publication should not be construed as legal advice or legal opinion on any specific facts or circumstances. In addition to potential forgiveness of PPP Loan principal, any portion of the PPP Loan that will need to be repaid will have up to a 10-year term with an interest rate not to exceed 4 percent. The disaster loans are a means of providing a way to recover from natural and man-made disasters that … Yes. That is "your pay." Our loan specialists can help answer any additional questions around “are business loans tax deductible?” Plus, you  can score a 10-year loan with amounts ranging from $20k to $5 million. For EIDLs made during the covered period, personal guarantees will not be required for loans of $200,000 or less. Grand Rapids. Find out how we're building a better financial world. Fortunately for you, SBA 7(a) loans are term loans (the only difference is they’re guaranteed by the SBA).This means you can deduct your interest payments. SBA Loans. The term of … A forgiven PPP loan is tax-exempt. ©2020 Barnes & Thornburg LLP | Attorney Advertising, Considerations for Dental Practices During the COVID-19 Pandemic, Why Retirement Plan Sponsors Should Care About the CARES Act, Coronavirus: Families First Guidance – An Employer Q&A, SEC Offers Relief from Certain Filing and Delivery Requirements during COVID-19 Pandemic. Jesse studied Public Relations at Brigham Young University. E-mail or other means of communication), do not disclose information you regard Applications are expected to be processed on a rolling basis in the order of applications received. If two or more businesses are considered “affiliates” under these rules, the number of their employees of each company will be aggregated to count toward the 500-employee limit. However, if the business rehires or restores salary before June 30, 2020, to pre-COVID levels, the amount of forgiveness will be determined without regard to the previous reduction in employees and salary. advice. SBA Express Bridge Loan: With values up to $25,000, these loans require less paperwork and hit your bank account much faster than a typical SBA loan. To apply for forgiveness, the business must submit an application to the lender including documentation verifying payroll, pay rates, mortgage payments, rent payments and utility payments. Also, the SBA has a “Lender Match” tool available to assist such businesses in finding an approved SBA lender. Do you want to receive more valuable insights directly in your inbox? © 2020 Barnes & Thornburg LLP. How Businesses Can Use SBA Loans Under The CARES Act March 30, 2020 +ADD TO E-BRIEFCASE ... and payments of state or local taxes assessed on the compensation of employees. As a result, it is possible that the full amount of the PPP Loan could be forgiven. If you’re planning on getting a loan, you might be wondering how that influx of capital will affect your tax commitments. Jesse Sumrak is a Content Marketer at Twilio SendGrid focused on writing killer content. Receiving a lump sum of cash in the form of a loan is different than earning revenue for your business. Running a small business is tough, especially when working capital is low and expenses are high. SBA Coronavirus Loans Can Keep You Afloat Business loans are also likely to come with restrictions. If you settle your tax affairs before the loan charge arises you will pay tax at the rates for the years you received the loans. Or put the money back into your business and pay it that way. The documents that you can present to support your case include expense reports and income statements, tax return and business and personal assets documents. Business loans can be useful tools for creating cash flow, buying equipment and maintaining supplies. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation. I don't see much downside. Use of PPP Loan Funds: The business may use PPP Loan proceeds to pay salaries and wages (including normal commissions), costs related to continuing group healthcare benefits during paid leave, other employee compensation, mortgage interest, rent, utilities, and interest on debt if the obligation was incurred before Feb. 15, 2020. Appealing an SBA Loan Default Claim To make your case, you will need to prove that you are not able to pay back the funds within a reasonable period. In addition, a “credit elsewhere” underwriting test is used for other SBA loan programs – where a business could be ineligible if the SBA determines that it could obtain credit from a private source on reasonable terms – is eliminated with respect to PPP Loan. Taking on small business debt always has some inherent risk. Favorable Business Terms: The act sets out a number of favorable business terms for PPP Loans. The SBA is obligated to fund the $10,000 within three days of its receipt of the application. These emergency loans shouldn’t be used to refinance debt, pay shareholder distribution, or satisfy tax penalties. While the EIDL loan is technically not being used to pay off debt, it still enables cash flow by freeing personal / business savings. Under the program, the SBA can loan any qualifying small business that’s been affected by COVID-19 up to $2 million at a 3.75% interest rate. The amount of the advance would not have to be repaid even if the EIDL is denied. Included in the act is $349 billion allocated for loans guaranteed by the Small Business Administration (SBA) to small businesses and other businesses and nonprofits with fewer than 500 employees, which will run through the SBA’s existing Section 7(a) business loan program. Plus, it’s a huge benefit that you can deduct more at the beginning of your repayment schedule to help ease yourself into the new debt. persons or entities involved in the matter and that the firm is willing to consider Jesse has spent almost a decade writing about small business and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped startup. Note that this benefit is limited to SBA 7(a) loans and wouldn’t be applicable for PPP loans or EIDLs. Learn about the Paycheck Protection Program. By clicking any link on this page you are giving your consent for us to use cookies. With term loans, your interest payments are tax-deductible. Barnes & Thornburg LLP appreciates your visit to the firm’s web site. Detroit Metro, Learn more about our SBA 7(a) loans, or go ahead and start your application now. Ann Arbor, Detroit Metro, Grand Rapids, Ann Arbor, If you have to, just use it for "payroll", pay yourself, and pay the taxes yourself. To answer the question of “are business loan payments tax deductible?” you first  need to meet a few IRS qualifications: You’ll also need to make sure you don’t use your funds inappropriately: Other than that, your SBA 7(a) business loan interest should be eligible for a tax deduction . Loan Size: An eligible business may receive an amount of up to 2.5 times the average of the business’s monthly “payroll costs” or $10,000,000, whichever is lower. The Fine Print. Get our latest news and information on business finance, management and growth. Use a Hybridge® SBA Loan as a short-term bridge loan to fund any opportunity, from hiring additional staff, to expanding or relocating your business .Hybridge® SBA Loan package, business owners receive SBA funding in as little as 60 days, instead of the 6 months taken by traditional lenders. Visit our subscription center and let us know what you're interested in learning more about. There’s no obligation to accept the loan if offered, no cost to apply, and no closing fees. It may be smart to keep the funds separate and use the PPP loans to pay employees since 75% of the funds must be used for payroll in order to be forgiven. Eligibility:  The act increases the number and types of businesses that are eligible to receive assistance as compared to a typical SBA loan. Certain self-employed individuals, sole proprietors and independent contractors also may be eligible to participate in the PPP Loan program; as are certain hospitality and food service industry businesses as long as they do not have more than 500 employees working at each different physical location. All rights reserved. In the meantime, though, businesses considering applying should gather certain basic information, such as key organizational documents, its tax identification number and payroll costs (including associated benefit costs described above) for the past 12 months. An SBA (7a) loan is the Small Business Administration’s (SBA) most popular loan, and it’s not hard to see why. A Message to Our Barnes & Thornburg Friends, Clients and Family, Diversity Matters: Standing for Change - A Conversation with Partner Lindsey Dates, Drug and Medical Device Companies Subject of Special Fraud Alert on Speaker Programs, A Tweet For A Tat: Magazine Founder’s Twitter Post Ruled Unlawful. Small Business Administration loans can provide flexible financing options at competitive terms if you're starting or growing a small business. The amount of forgiveness may be reduced due to reductions in number of employees or salary as compared to a specified pre-COVID period. Get inspired, read advice, and learn how to help your business thrive. Borrowers can also request a forgivable cash advance of up to $10,000 to cover these expenses, which the SBA must distribute within three days. We’ll compare paying off your federal tax debt with a personal loan to other solutions, like using a credit card or an IRS installment agreement. Assuming you pay a 21% tax rate, your bill would be $20,244 (with deducted interest) compared to $21,000 (without deducted interest), a difference of $756. "You can use a personal loan for almost any legitimate purpose, including to pay your taxes," says Josh Zimmelman, owner and founder of Westwood Tax & Consulting in New York City. Businesses use SBA 7a loans for working capital. Basically wash it. To help you navigate through the new SBA Loan opportunities and the tax provisions resulting from this and the CARES Act, we have provided you with a list of Frequently Asked Questions. As of this date, the application process has not been finalized. Small Business Administration (SBA) loans. To obtain more information, please contact the Barnes & Thornburg attorney with whom you work, or Jason Myers at 214-258-4157 or jason.myers@btlaw.com, Jeremy Reidy at 260-425-4662 or jeremy.reidy@btlaw.com, Jenni Tauzel at 214-258-4145 or jtauzel@btlaw.com, Mary Comazzi at 947-215-1319 or mary.comazzi@btlaw.com, or Ryan Barncastle at 310-284-3822 or ryan.barncastle@btlaw.com. 6054785). For example, Small Business Administration (SBA) loans can be used only to operate your business. For many affected businesses, the Coronavirus Aid, Relief and Economic Security Act (CARES Act)  provides opportunities to receive assistance or relief in order to make it through the COVID-19 pandemic. Most term loans are structured so that you pay higher interest at the beginning of the repayment schedule and lower towards the end. Although the EIDL loan can't be used to refinance debt or repay federal debt, there's an exception for tax debt. But it’s important to understand the costs involved and how personal loans work. Additional limitations exist if you have also received a PPP loan, as the SBA guidelines state that PPP and EIDL disbursements cannot be used for the same purpose. For example, the Business Physical Disaster Loan can be used for real estate, personal, property, machinery, equipment, fixtures, improvements, and leasehold improvements. COVID-19 Vaccines Are On The Horizon, Can Employers Mandate Them? Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months). If you’re looking for an affordable solution to your working capital needs, consider getting an SBA 7(a) loan. The CARES Act also created a new SBA loan and grant program — the Paycheck Protection Program loan — to encourage employers to keep workers on payroll. If you have an existing SBA 7(a) loan, the SBA would pay the principal and interest for 6 months. Real world answer: no one is ever going to know or care what you do with an EIDL loan as long as you pay it back. as confidential. States that Ineligible uses of the EIDL include "Payment of any part of a direct Federal debt, (including SBA loans) EXCEPT IRS obligations". For instance, a small business could decide to combine the use of a loan under the EIDL program with the ability to defer payroll taxes as allowed under this provision. We use cookies on this site to enhance your user experience. It may not be reproduced, in any form, without the express written consent of Barnes & Thornburg LLP. A personal loan could allow you to borrow anywhere from $1,000 to $100,000, depending on loan limits. The act also made an existing SBA loan program easier to obtain and more attractive. Maximum loan amount is $2 million, with an immediate advance of up to $10,000 from the SBA. Usually, expenses like payroll, rent and utilities are deductible from your normal taxable income, and it means you owe less tax at the end of the year. SBA 7(a) Loans and Your Taxes—Everything You Need to Know, Updated: SEC Again Highlights Risks of Investing in Chinese Securities, 2020 Diversity and Inclusion Summer Publication. One potential limitation on the eligibility of a company relates to the application of the SBA’s standard rules on affiliation. I see no reason not to pay quarterly taxes (I assume that you are a sole proprietor or independent contractor) if you are paying them to yourself first. To be eligible, the business concern must also have been in operation on Feb. 15, 2020, and paid employees or independent contractors during operations. provided for informational purposes only and should not be considered legal A new benefit provided by the act is the opportunity for an immediate emergency advance of $10,000. You can use the EIDL funds for … Loans are made by FC Marketplace, LLC, and loans to California residents are made pursuant to its California Financing License (No. Repayment begins one year after the loan origination date and interest is accrued during the deferment. With term loans, your interest payments are tax-deductible. Tags: The time frame can stretch as long as 30 years, and businesses are allowed to defer repayment for up to a year. Every small business is unique, and SBA’s Economic Injury Disaster Loans are available to be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the disaster’s impact. These loans can be used to pay the accounts payable, payroll, fixed debts, and other bills that can’t be paid because of the disaster’s impact. This page, and all information on it, is proprietary and the property of Barnes & Thornburg LLP. Borrowers can apply for both the PPP and EIDL, although funds from both cannot be used for the same purpose. A: Yes, if you use the funds differently from the EIDL and the PPP. This means you can write off your interest payments as business expenses and lower your overall tax burden. First, the good news is that most loans won’t substantially impact the taxes you owe. The act waives the requirements of business owners providing personal guarantees and businesses having to provide collateral to secure the PPP Loan. Unless otherwise agreed in advance, all unsolicited You can’t say you’re going to get deductions for workers that you didn’t pay for.” If you’re a small business owner trying to use these funds to stay afloat, you probably don’t want to get into the intricacies of tax law. Before we can answer what happens if I don't pay back an SBA loan, you need to understand your liability. The Expectation: What Does Tax-Free Really Mean? However, eligible businesses will find it in their best interest to get in touch with their bank as soon as possible to determine whether the bank is an approved SBA lender and to initiate discussions regarding the loan. For any employee whose compensation is greater than $100,000 on an annualized basis, that portion in excess of $100,000, on a prorated basis, is excluded from the determination of “payroll costs.” Self-employment … For example, two affiliated companies with 300 employees each would be considered to have 600 employees, and neither would be eligible for the PPP Loan program. *Please note that this information is subject to change based on the constant release of new guidance and information. Small Business Administration (SBA) loans, Small Business Administration (SBA) loans  >, IRS’s explanation under “Capitalized interest”, You are the legally liable person for the loan, You’ve made an agreement with the lender to repay the loan, You and your lender have a “true debtor-creditor relationship”, You can’t deduct interest paid using funds from a 2nd loan (refinancing) to pay off your 1st loan, You can’t deduct interest payments if you assumed debt or property from an original owner—these will be depreciated, You can’t deduct capitalized interest (see the, You can’t deduct interest payments made on fees intended to be used on a standby basis. So, you won’t be taxed for the principal amount. Once the SBA finalizes the application process (expected during the week of March 30-April 3), SBA lenders will know what other information will be required for PPP Loans. Step 3. Our site is Paying yourself from EIDL funds is a source of confusion for … Under the Paycheck Protection Program (PPP) Loan, in addition to small business concerns eligible for SBA loans, eligible entities include businesses, 501(c)(3) nonprofit organizations, veterans organizations, or Tribal business concerns with 500 or fewer employees (including full-time and part-time employees), which number may be increased for certain industries that are subject to higher employee thresholds as set forth in the SBA’s size standard tool. Depending on the type of loan, it can be used for a range of purposes, such as buying equipment, real estate or inventory. These government-backed term loans provide you with a large cash sum with low interest rates, manageable payment terms, and flexible spending. Borrowing Procedures: In order to apply a PPP Loan, the act requires a borrower must make a good faith certification that the loan is necessary in light of the current economic conditions, an acknowledgement that the funds will be used for the outlined purposes, and that it does not have other applications or has not received any funds for other PPP Loans. • The Paycheck Protection Program loan proceeds must be used for eligible purposes according to guidance and some or all of the loan may be forgiven if used properly. Visit the SBA’s website to learn more about applying for an EIDL. Many commentators have noted that the $349 billion allocated for the PPP Loan program likely will not satisfy the demand, so it is important for business to make contact with an approved SBA lender as soon as possible. However, using the loan can also reduce how much you can write off on your business taxes, so keep that in mind when applying for the loan. Through Dec. 31, 2020, any business with 500 or fewer employees may apply directly to the SBA for an EIDL in response to COVID-19. But, business loan tax deductions make borrowing a little less scary. With this program, you can borrow up to $10 million and get up to your full loan amount reimbursed if you keep your employees on salary and spend the funds on eligible expenses. This means you can claim larger business loan interest tax deductions when you start your loan payments, and this helps offset your new debt. May 22nd, 2020. Lenders are required to provide deferral of all principal, interest and fees for PPP Loans for at least six months, up to a period of one year. If the business already received an Economic Injury Disaster Loan (EIDL) on or after Jan. 31, 2020, it may refinance and convert the EIDL to a Section 7(a) loan using the proceeds from the PPP Loan. But applying and getting approved for an SBA loan can require extensive documentation. accepting representation. If it is not okay, the worst case scenario seems to be that you will have to pay back the loan at 1% for paying income taxes that you owed anyway. Pursuant to the act, the amount forgiven will not create income tax. Your interest payments, however, are a tad different. You won’t save as much as you deduct, but making small business loan payments tax deductible is still a significant economic boost. EIDLs are low-interest loans with a maximum maturity of 30 years—determined by your lender. Payroll costs are defined in the act to include: salary, wages, commission, or similar compensation; payment of cash tips or equivalent; payment for vacation, parental, family, medical or sick leave; allows for dismissal or separation; payments for providing group healthcare benefits, including insurance premiums; payments for retirement benefits; and payments of state or local taxes assessed on the compensation of employees. He's created and managed content for startups, growth-stage companies, small businesses and publicly-traded businesses. The lender must make a decision regarding qualification for forgiveness within 60 days after its receipt of the application for forgiveness. This deferral period should give businesses and lenders time to determine the amount of any loan forgiveness. The interest rate is 3.75% for businesses and 2.75% for nonprofits. The first payment on the economic injury loan issued due to the coronavirus will be automatically deferred for one year. When you’re paying one off, you can likely deduct the interest you pay from your taxes. So you may want to consult with a tax professional if you’re unsure about the validity of a deduction. Before a business begins allocating funds to the various expenses that are piling up, it's important to note that the SBA states, "These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can't be paid because of the disaster's impact." The only significant downside to an SBA 7(a) loan is the intensive paperwork and processing—but since we can help streamline that for you, this loan really is a win-win. The SBA affiliation rules are very broad, and affiliation is determined based on a wide-range of methods of control, as determined by the SBA, including more than 50 percent ownership; significant minority ownership vis-à-vis other minority owners; certain voting/contractual veto, approval, or other similar rights; or managerial control. So we’re breaking down what you need to know here. The SBA’s disaster loans can help you pay for just about anything you need to afford after a disaster. 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