The Economic Injury Disaster Loan (EIDL) program enables small businesses to access low-interest capital with long repayment terms. Policy changes in September expanded the way businesses could utilize EIDL funds, but many questions remain. Previously, we wrote about seven ways that EIDL funds can be used legitimately. Here, we will address six common misconceptions about the EIDL program.
EIDL Funds Can Be Used To Expand Your Business
According the FAQs, EIDL funds cannot be used to expand a business. EIDL funds can be used for a wide range of business-related purposes, but the loan's purpose is to help your current business flourish and sustain itself. Working capital, payroll, and business debt are all expenses that EIDL funds can be used for. EIDL loans are not intended to expand your business. If you are looking to purchase new real estate, open a second location, or expand your business in other ways, consider other SBA options, such as the 7(a) or 504 loans or private funding options.
EIDL Funds Can be Used To Buy/Start Another Business
This is also false. EIDL funds cannot be used to start or purchase another business. The EIDL loan program is one of the SBA's disaster loans, so it's intended to be used to recover and rebuild from the economic disaster caused by the pandemic. Businesses interested in purchasing another business are better off pursuing other federal or private loans. Those interested in starting a business cannot qualify for EIDL because businesses must have been in operation since January 2020.
You Can Pay Stipends or Bonuses With EIDL Funds
Payroll is an eligible EIDL expense, but the FAQs make it clear that bonuses and stipends are not eligible expenses. Regular salaries, wages, overtime, sick pay, vacation, and other regular payroll expenses can be paid with EIDL funds. As a business owner, you are certainly eligible to pay your salary using EIDL funds as long as you are actively contributing to your business. However, bonuses or stipends to shareholders are not eligible expenses.
Personal Assets Will Be Used As Collateral For EIDL 2.0
Personal assets will not be used as collateral. On Friday, Ryder, our CEO had an exclusive conversation with the Senior Advisor to the SBA’s Office of Capital Access, Veronica Pugin. During this interview, Ms. Pugin clarified a very important point: business owners who do not have business real estate will not be required to put up their personal assets as collateral. This is welcomed news to the tens of thousands of business owners who were concerned about this. However, you still need to list your personal assets when applying for an increase of over $500K.
You Must Wait To Apply For EIDL Loan Increases Over $500K
Businesses do not need to wait to apply. Ms. Pugin from the SBA stated that businesses do not need to wait to apply for an increase of over $500K if they have the ability to (if they see the "request more funds" button). Applications for increases over $500K will not be approved until October 8th and following, but the sooner businesses apply, the better. The SBA anticipates a wait time of over a month for the increases of over $500K to be approved. If you can apply, apply now.
You Can Request An EIDL Increase At Any Time
Not every business can apply for an increase right away. Many businesses do not see a "request more funds" button on their EIDL portal but believe they qualify for an increase. If this is your situation, Ms. Pugin from the SBA stated that there are two likely reasons. The first reason is that you do not qualify for an increase. You can check the amount you qualify for on your Skip dashboard.
The second reason could be that the SBA has not processed your initial request or increase. Once that processes, you will be able to request an increase up to the amount you want. If neither one of these situations apply to you, email the SBA at email@example.com. You can also reach out to your local SBA office for assistance.
Get Personalized Help With EIDL
Do you have other questions about EIDL 2.0, including reconsideration, new collateral requirements, or how to get approved? Get ongoing personalized funding help from our team. There are over 2,000 on our waiting list, but you can skip the wait list completely with this invite link, exclusive to our readers.