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EIDL Loan - I Got Approved For $120,000 | Loan Contract Breakdown - YouTube
Channel: The Kwak Brothers
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approved for $120,000 so a couple of
videos ago I showed you guys how the SBA
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reached out to me saying that I could
apply up to $150,000 well I wanted to
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apply for $120,000 portion and guess
what?I've been approved and they sent me
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this email saying that your SBA economic
injury disaster loan application is
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approved so what I'm going to do is in
this video I'm gonna break down the
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contract and the documents that they're
asking me to sign whether am I going to
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pull the trigger on this or not so let's
go and play the intro music and come
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back and I'll show you guys break down
the economic injury disaster loan
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application process hey what's going on
guys this is Sam Kwak here one of the
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Kwak Brothers and many of you guys apply
for the economic injury disaster loan
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within the SBA program some of you guys
might be waiting maybe you've been
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approved like I am and in this video I'm
gonna go and break down the document in
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the contract that the SBA is having me
sign it won't break down give you my
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commentary on my thoughts whether this
is a good program not a good program and
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as always going to subscribe to a
channel if you want more updates and
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breakdown to SBA programs stimulus
programs as well as real estate
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investing now just another reminder for
you guys saying that I am NOT an
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attorney I am NOT an accountant I'm not
a financial professional so any
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interpretation of this contract are
simply my opinion in my own perspective
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be sure to consult with an attorney in
fact right after this video I'm gonna go
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and call my attorney and start reviewing
this contract together I haven't really
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dug deep into the contract just yet so
this is gonna be my first time diving
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really deep and getting to the details
again please talk to an attorney for
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your business for your contract I'm just
simply providing my commentary my own
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opinion about the e IDL program now what
I'm gonna do is I'm gonna go and share
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my screen to show you guys the loan
authorization agreement which is
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the contract for the EIDL I got my contract
reading glasses here
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not for my eyesight but this is to block
any blue lights or UV rays so here we go
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so let's go ahead and start from the top
and this is a really long contract if I
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were to review everything this is gonna
take about an hour so what I'm gonna do
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is I'm gonna go and highlight the most
important things the things that stand
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out the most and I'll make a separate
full review of the contract on our
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Facebook group which is the landlord and
passive income mastermind Facebook group
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so if you have not joined that group yet
the link is down below in the video
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description go and click on the face
group join the group and I'll have a
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full long review of the contracts but
I'm just gonna go in highlighting again
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the most important thing so here it is
known authorization in agreement right
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out of the gates is showing me how much
I'm borrowing hundred twenty thousand
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dollars with the principal and interest
payment of five eighty five monthly for
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thirty years now it's saying that for
twelve months from the date of the
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promissory note I don't have to make any
payments so the five eighty five payment
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won't begin after the 12 months of a
deferment period that's when it's gonna
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start kicking in again thirty years for
3.75 percent interest rate which is you
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know rather low it's actually pretty
good pretty decent not too bad the next
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big thing I see here is the collateral
part where it's basically saying that if
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I'm borrowing more than $25,000 under
the EIDL I have to pledge collateral as
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part of borrowing the money from the EIDL now I'm not gonna go through the whole
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thing it's basically saying that SBA
will have a full control over the assets
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and different security and different
collateral of my business so my office
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equipment any non tangible assets those
are all going to be secured so basically
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if I don't end up making the payments
and I go default on the SBA loan SBA has
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a right to come and seize my assets in
my business if I were to become a
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default so there's a lot of stringent
requirements here but I get it right
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this is a lot of money that they're
giving out they just want to have
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protection for themselves as well the
next three big things I see here are
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more requirements by the SBA it's
basically saying that I'm not allowed to
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sell any collateral or sell or transfer
any collateral without written consent
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from the SBA I I can't get any financing
or any other loans to pledge the
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collateral without the consent of F's VA
it also says that I can only use the
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funds solely for working capital to
alleviate economic injury caused by
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disasters so I can't use this to go and
pay off other loans or expand or
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anything like that I can only use it for
operating expenses and they're gonna
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charge me $100 fees to do so
requirements for the use of loan
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proceeds and receipt this is basically
saying that I have to keep all records
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contracts receipt invoices any amount
that I've used auto loan I have to keep
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any records of that and it's also saying
that the SBA has the right to come and
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audit me to see how I spend
the money so get more requirements more
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auditing more control by the SBA totally
get it because they're giving you the
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loan
another big item that I'm seeing here is
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that SBA is demanding that I sign and
return this document within two months
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of receiving this so within the next two
months I have to sign and return it if I
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don't then it will be cancelled and I
won't have that offer anymore
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the next item I'm seeing here is the
compensation from other sources so it's
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basically saying that if I apply for
other disaster assistance or if I get
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any other assistance from other entities
I have to let SBA know that I received
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other funds as it relates to economic
injury from the disaster of Cobie 19
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pandemic duty to maintain hazard
insurance this is basically saying that
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SBA is requiring me to hold an insurance
for my business if I don't have
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insurance
SBA is going to bar me and restrict me
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from getting any other feature disaster
assistance or SBA financial assistance
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if I don't have the insurance that the
SBA is requiring me to do so the next
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big item I'm seeing here is the books
and records part where SBA is demanding
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that I have clean books I record
everything all operating statements must
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be reported documents such as insurance
policies tax returns and related filings
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records of earning distributed and
dividends paid so a lot of
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record-keeping that the SBA is demanding
the big thing that I'm seeing here at
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this point is that the SBA could demand
an audit being done by an accountant and
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the borrower view the business needs to
pay for a public accountant to get that
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audit done so at any time the SBA can
say hey we're gonna do an audit of your
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company go and hire a public accountant
and go in furnish a review a report so
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that we can go and check out how you use
the funds and how you're doing with your
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business you know this is a good one
borrower authorizes all federal state
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municipal authorities to furnish reports
of examination records and other
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information related to the condition and
affairs of borrowers and any desired
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information from such reports returns
files and records of such authorities
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upon request of SBA so this is basically
saying hey you are going to let the
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federal government state government and
local municipality to pretty much come
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and take information about your business
and hand it over to the SBA so a lot of
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restrictions a lot of control by the SBA
again I
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I understand this is the government's
way of saying hey we'll give you money
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but you have to let us in and you know
control a little bit of your business
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here so further down the line I'm just
gonna keep on moving along and I'll
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highlight some important things again if
you want a full-blown review of this
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entire contract I'll go and leave it in
our Facebook group and if you enjoyed
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the breakdown so far going smash the
like button as it helps our YouTube
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algorithm help us get this video out to
as many people as possible so that they
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can get a little preview on what to
expect from the e IDL program okay so
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the next big item that gonna highlight
here is the borrower's certification
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this is basically saying that there's no
adverse condition that was changed in
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your business so no leads no
bankruptcies since you've applied
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another big thing I'm seeing here under
this section is saying that there's no
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fees to be paid to attorneys or
accountants for services provided to you
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in connection with applying or closing
this loan so I don't know if that also
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applies to counsel because I'm thinking
about hiring an attorney to represent me
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and get information about what I can
cannot do under this loan so if I'm
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reading this correctly SBA is pretty
much saying that you can't hire an
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accountant to help you review this loan
document so that you can make a better
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decision I don't know if that's a good
thing or not because that obviously
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restricts your ability to be informed to
make a good decision whether or not you
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want to pull the trigger on this program
and down below here are the consequences
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of obviously lying and misusing the
funds so it says whoever wrongfully miss
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applies the proceeds of an SBA disaster
loan shall be civilly liable to the
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administrator in the amount equal to one
and one-half times the original
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principal amount of the loan under 15
USC US Constitution 636 B and so
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basically if you if you lie to the SBA
or you misuse of funds from the loan
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basically you can be liable for the
entire amount of the loan or by one and
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a half times one hundred fifty percent
of the loan amount so they're pretty you
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know they're they're pretty much saying
hey if you do us wrong we'll do you
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dirty and then it you know we'll do some
a lot of bad things too yeah you
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definitely don't want to screw up with
the SBA and mess with the e ideal
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program okay it says result of violation
of this loan authorization agreement if
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the borrower violates any of the terms
of the condition of this loan
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authorization agreement the loan will be
in default and
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BMA declare all or any part of your
indebtedness immediately due and payable
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SPS failure to exercise its right under
this paragraph will not constitute a
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waiver so basically again if you violate
any of the contract and I'll go and give
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the full breakdown another video in our
group basically they'll come and seize
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all of your properties and your loan
amount is due immediately there's no
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30-year repayment none of that okay
disbursement alone this is basically
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saying that the SBA is up to six months
to give you the loan amount after it has
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been signed so I don't know how I feel
about this again because some businesses
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may then need this money right away
right now because they're going through
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such a hardship that they don't have six
months right comes six months they may
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have to file bankruptcy or they have to
foreclose on properties and they have to
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layoff people so I don't know if six
months is ample time but again this is
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the government and again I'm not saying
our government is terrible it's it's
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great that we have these types of
programs but a lot of times things are
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slow and fortunately that's the way it
is okay let's go and continue resolution
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of Board of Directors this is basically
saying if you have a corporation you
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have to do a resolution more
record-keeping saying that hey you
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received the money from the SBA so
that's pretty much the loan
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authorization part there's other
information in regards to lobbying you
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can't use the money to lobby from the
Congress this is a poster for equal
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opportunity that you have to post on the
side of your business it's also in
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Spanish which is cool all right so here
it is the note it promised to pay one
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hundred twenty thousand dollars pretty
simple right
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collateral means any property taken as
security so payment term 585 every month
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beginning twelve months from the date so
12 months of deferment and 30 year term
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and here's what constitutes default of
this loan and they have a pretty long
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list here I'm not going to go through
everything but it's basically saying
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fails to comply with the provision of
the note or the loan authorization
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agreement defaults on any other SBA loan
cells or transfer any of the collateral
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making any misleading representations to
SBA defaults on any of the loan
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agreements fails to pay any taxes when
do if the borrower goes to any
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bankruptcy or insolvency the SBA pretty
much thinking that you can't pay back
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the loan if you die reorganizes merges
or consolidates with any other
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businesses becomes the subject of civil
or criminal
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right so all the things that constitute
as default is it's listed there and
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further down the page here are the SBA's
right if there is a default so it says
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without notice or demand or without
giving up any of its rights sba may
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require immediate payments of all mounts
under this note have a recourse to
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collect all amounts owing from the
borrower file suit or obtain judgment
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take possession of any collateral sell
lease or otherwise dispose of any
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collateral at public or private sale
with or without advertisements so the
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SBA pretty much can come in take your
possessions right and sell the property
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to you basically liquidate them and
that's pretty much what happens if you
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default on this loan and further down
the page here is the security agreement
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this is basically securitizing any
collateral so all the collateral that
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that I am right office equipment sudio
equipment right in tangible or
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intangible assets this is what its
securitizing my business so here it is
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for $120,000 I am granting security
interest to the SBA of any possession
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that I own within the business so for
$120,000 here all the rights that the
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SBA has collateral description so here
it is just a repeat of pretty much what
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was mentioned in the loan authorization
agreement right inventory equipment
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instruments chattel paper deposit
account checking accounts okay it
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restricts my ability to transfer any
collateral right so I can't transfer
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these camera equipments to other
businesses without the consent of the
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SBA I have to maintain the equipment and
SBA apparently has a right to come and
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inspect the collateral if they want to I
think and come into my business and
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check out my stuff I got their cameras
nice look at that right they hey these
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computers look awfully nice it looks
like if you default we'll get these
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computers right so obviously you can see
all the rights that the SBA has if you
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default right the security agreement
pretty much the plates all of that okay
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perfection of the security interest this
is pretty much using the Uniform
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Commercial Code to perfect it and here
it is here's the provision for what
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constitute as default if the borrower
makes any material false representation
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right lies or misleads the SBA to
believe in certain false lies or
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pretense then that could constitute as
default as well so pretty much
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everything else is general
contract language fright lingo that
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applies to every other contract so
overall here are my thoughts about the
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eid ell program under the sba there's
clearly a lot of restrictions a lot of
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Liberty that's being taken away with
this loan and obviously the SP can come
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in and audit you and you have to pay for
the audit expense if you're borrowing
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more than $25,000 you're pretty much
pledging everything your business that's
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collateral and if you're in default the
SBA can come in and seize your equipment
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take your assets and sell them as they
wish so there's a lot of restrictions
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and there's a lot of liberty and freedom
being taken away from being able to
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operate a free business so I'm not
really sure if I want to take this loan
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I don't think I want to I do still want
to have a conversation with an attorney
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before I sign anything but with the
whole programs that says that I can't
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hire an attorney or an accountant to
represent me in connection to closing
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this loan that is a red flag on its own
so I don't know if I want to sign this I
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won't I think I want to walk away again
I'll have a conversation with my team
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and my brother and make a final decision
but overall I don't think I'm gonna move
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forward with the EIDL loan simply
because there's a lot of restrictions a
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lot of control by the SBA and quite
frankly I don't absolutely need it I
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mean my original idea was to go and use
this fund to refinance um my owner
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financed properties and and pay off
certain things but it sounds like I
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can't even do that I has to be for
working capital and operating expenses
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which quite frankly don't need right now
so I'll probably end up walking away
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from the e I do mainly because after
reading the terms in agreement I'm not a
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big fan of any of the terms any of the
restrictions and the control that the
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SBA has and again if you want to see a
full detail breakdown of this contract
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I'll go and make a separate video in our
Facebook group landlord and passive
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income mastermind group the link is down
below in the video description as always
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if you wanted to see more breakdowns
more updates with stimulus program SBA
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programs as well as we're all staying
investing be sure to subscribe to your
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channel and hit the bell notification
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