eidl monies

Client has chance to get loan from eidl.

Says the funds are to be used only for 'working capital'

Would this preclude a owner of a corp getting paid salary or
a sole proprietor taking drawer while times are slow?

I do not believe so.

Use other monies.

i thought working capital is just for expenses of the business

but wasn't sure about officer's comp

Good article on restrictions related to EIDL loans. Looks like S Corp shareholders can't take any distributions while the loan proceeds are outstanding. (S Corp shareholder salary is fine.)
https://www.forbes.com/sites/alangassma ... 9674d43049

I know what the COVID related EIDL loan docs say. They were rushed through, and the article mentions what I have been arguing all along:

Further, SBA presentations and a Standard Operating Procedure document from 2018 provide the following to enumerate the ineligible uses of EIDL loan money:

EIDL proceeds may not be used for:

2. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant;

If you are a service business--say a lawyer or CPA--you are directly performing services for the benefit of the applicant. Under the 2018 EIDL Standard Operating Procedure guidelines (which are quite lengthy, nearly 400 pages if I remember correctly), certain distributions ARE allowed. But if you have an S-Corp and are not performing services? No go. The SBA is not dumb enough to overlook the fact that when you perform services for an S-Corporation, distributions certainly remain part of the shareholder's income. I believe what they are trying to prevent are the more passive shareholders that receive company assets as distributions when they do little or nothing to contribute to the company's ability to remain a going concern. That is, basically just investors instead of active participants by directly performing services for the entity.