If you received a loan under the EIDL SBA program, you were provided with a low interest rate loan that you can use immediately to cover the ongoing operations of your business. However, before you start spending, you should be aware of some key limitations to using EIDL.
What can I use an EIDL loan for?
The EIDL program is the least restrictive assistance program and allows you to use the loan as working capital. This means that ongoing expenses are the legal use of your EIDL funds and give you the freedom to spend them on:
- lodging
- Inventory
- Office supplies
- Billing liabilities
- Rent and utilities
- Commercial rates
- Accounting and bookkeeping services
If you received an EIDL and PPP loan, you cannot use EIDL to cover the same expenses for an 8 or 24 week period. However, once the entire PPP loan is exhausted, the EIDL can be used to cover salary, rent, lease, mortgage interest, and utilities that would otherwise be covered by the PPP loan.
You can also use it to cover your monthly financial obligations such as credit cards and credit card payments. However, you will not be able to pay the entire balance of this debt, as this is considered a refinance, which is an unacceptable use of EIDL funds.
What can I spend the EIDL deposit on?
The EIDL advance is a grant that you can apply for at the same time as the EIDL loan. The scholarship is $ 1,000 per employee, up to a maximum of $ 10,000. In grant form, this can be used as working capital that basically covers all the running costs that your business needs.
What can’t I spend my EIDL on?
While this is the most flexible tool, there are some important limitations to be aware of. By signing the loan agreement, you have confirmed that the EIDL funds will not be used for any of the following purposes:
- Dividends and bonuses
- Payments to owners (projects and distributions) except when directly related to the provision of services
- Repayment of loans to shareholders / directors
- Expansion of facilities or acquisition of fixed assets (for example, purchase of equipment such as a new camera)
- Repair or replacement of property damage
- Long-term debt refinancing (for example, paying off large debts with a credit card)
- Federal loan repayment (from the SBA or other federal agencies)
- move
What if I have a PPP loan?
PPP and EIDL are designed to be used together. Therefore, of course, there are certain conditions for using loans if you have both. In particular, the EIDL cannot be used for the same APP spend during an allocation period of 8-24 weeks.
To cool off, you can use your PPP funds as follows:
- Wages and salaries (gross wages or salaries, gross tips, gross commissions, severance or severance pay, employee benefit costs, and all types of paid leave, including vacation, family, sickness or sickness, but not including family leave with coronavirus covered by Act when Responding)
- Rental fees or lease fees
- Utility
- Interest part of your mortgage payment
That being said, you can use your EIDL funds for the above expenses if you don’t attract them under PPP. For example, suppose you spend all of your P3 on wages and rent. You can still use your EIDL funds for unforeseen expenses.
What is the best way to track the use of my EIDL funds?
Keeping your EIDL balance in a separate bank account is the easiest way to keep track of how it has been used. When requested by the SBA, you can simply provide bank statements to view all transaction history related to your EIDL funds.
Ultimately, there are no specific requirements for the business account you spend your money on. Easily keep track of all eligible expenses you can spend on EIDL. It is up to you to declare in which company you used the EIDL funds held on the loan, if requested by the SBA.
What is payday champion?
We are an online accounting service run by real people. Thanks to paydaychampion lender, you benefit from dedicated accounting and powerful reporting software that gives you a transparent view of the status of your finances. All of our services are eligible for a PPP grant and we can even help you apply (or get this PPP loan). Whatever happens next, we are here with you.
