The Coronavirus pandemic put many businesses and companies in difficult situations. Due to the limited face to face interaction caused by COVID, many businesses failed to bring in enough revenue to cover their expenses. However, the Small Business Administration (SBA) offered multiple loans to help out businesses who were suffering from the economic disaster related to the virus. The SBA offered the Paycheck Protection Program (PPP) loan in addition to the already established Economic Injury Disaster Loan (EIDL).
What is EIDL?
The Economic Income Disaster Loan, commonly referred to as EIDL, is a low interest federal loan designed by the SBA to provide economic relief to businesses experiencing a loss of revenue. Initially enacted several years ago to help businesses suffering from natural disasters, the loan is now most widely associated with the COVID-19 pandemic.
Possible EIDL Loan Problems
Unlike the PPP loan, which was meant to primarily support payroll, EIDL allows businesses to use the loan to cover normal operating expenses such as:
- Health care benefits
- Payroll costs during slowdown
- Rent payments
- Mortgage payments
- Fixed Debt Payments
Any small business or agricultural business is eligible to apply for the loan. However, most business owners fail to recognize the potential problems associated with the loan. Many borrowers may have already defaulted on their loans or inadvertently broke the law when they applied for them.
According to a Forbes article related to the loan, businesses may not use the funds to:
- Pay expenses that were covered by a PPP loan
- Pay dividends or bonuses
- Pay owners, partners, officers, directors, or stockholders
- Repay stockholder/principal loans
- Expand facilities
- Refinance long term debt
From the list above, it is easy to see how a business owner may have inadvertently used the loan funds illegally.
Potential Fraud Charges
The most common legal trouble from for a business owner that used EIDL would be federal fraud charges related to the loan. According to 18 U.S. Code §1334, bank fraud occurs when a person attempts to defraud a financial institution or obtain funds from a financial institution by means of false pretenses, representations or promises.
The penalties for federal bank fraud are severe. Individuals accused of federal bank fraud could be sentenced to up to 30 years in prison and fined up to $1 million.
With regard to State charges in Nebraska, business owners could be charged with a violation of Nebraska Revised Statute §28-619. Frequently the Federal and State authorities will coordinate so that only one of the two will actually pursue charges, although this is not a guaranteed outcome. According to Neb. Rev. Stat §28-619, it is illegal for any person to issue false financial statements to obtain a financial transaction device. In this case, a financial transaction device can include anything such as a credit card, electronic funds, a financial account, or a loan.
However, business owners may face different or unique charges related to misuse of the EIDL. If you are facing criminal charges related to your loan, it is important to consult with an experienced white-collar crimes attorney. A dedicated attorney can look at all the details of your case to determine the best defense available for you.
How a Nebraska Economic Income Disaster Loan (EIDL) Attorney Can Help
Individuals facing criminal charges for loan fraud are subject to serious criminal penalties, and the SBA has stated that they will be monitoring loans related to COVID. If you are facing criminal charges related to an EIDL loan, you may be in one of the most important battles of your life. A skilled Nebraska EIDL lawyer can look at the specific details of your case to build a strong defense strategy. Contact Berry Law today for help fighting criminal charges related to your Economic Income Disaster Loan.