7 Legitimate Ways to Use Your EIDL Funds


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The SBA’s EIDL program for the Covid-19 pandemic has officially closed. Though it is not accepting new applications, the SBA will continue to process reconsiderations and increases for applications that were submitted by December 31, 2021.

The EIDL's low-interest capital, 24-month deferment period, and long repayment terms are ideal for businesses in desperate need of funding. Each business is different and has different requirements, but here are seven legitimate ways to use your EIDL funds for your business.

Pay Yourself and Your Employees

Paying yourself is of the utmost importance. While EIDL funds cannot be used to make direct payments to owners, pay bonuses, or pay dividends to shareholders, EIDL funds can be used for payroll. Paying yourself and your employees (if you have them) is not only legitimate but necessary to keep your business running.

Pay Off Other Non-Federal Business Debt

Under the EIDL rules, businesses can use EIDL funds to pay off other business-related debt. Since the EIDL interest rate is 3.75%, any other business debt will likely have higher interest rates.

Using your EIDL funds to pay off your other business debt (especially high-interest credit cards) can save your business hard-earned money. Plus, paying off other debt with EIDL funds essentially consolidates your debt into one low-interest payment.

Remember, your EIDL funds can be used to pay off other debt ONLY if those purchases were EIDL-approved expenses. In other words, if the debt you currently carry was used to do something that EIDL funds do not cover – such as business expansion – you cannot use your EIDL funds to pay off that debt.

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Set Aside Money for Rent, Mortgage, and Utilities  

Once you pay yourself and rid your business of other high-interest debt, set aside some of the EIDL funds for several months (3-6 or more if possible) of rent or mortgage. This is another acceptable way to use your EIDL funds. Give yourself a few months of a buffer to breathe – knowing that your major expenses are paid for.

Stock Up on Inventory

Supply chains have been bottlenecked ever since the pandemic hit. The problem, in some areas, doesn't seem to be improving very fast and may even continue into late 2022 or even 2023.

If you have the ability to stock up – increase your traditional orders. This will give your business a buffer should your suppliers face more delays or shortages. Having an adequate inventory helps to ensure that your business has what it needs to keep making a profit.

Make Repairs to Your Business

If you have "that project" that has been left untouched for months or years, now is the perfect time to take care of it. To be clear, businesses cannot use EIDL funds to expand their business, so make sure your project is not an addition.

Consult with your local SBA office if you need to make additions to your building for safety reasons. That being said, if your building has areas that need attention or upkeep, EIDL funds can be used to bring vitality back to your physical structure.

Increase Your Marketing Efforts

Marketing is an essential expense for many businesses. Increasing your marketing efforts during these times can get your name out there, increase brand awareness, and attract more customers to your business.

Consider spreading your marketing budget across multiple marketing channels like social media, search engines, YouTube, email, and to other digital marketing strategies.  

Invest With Your Salary

To reiterate, EIDL funds cannot but used for bonuses or to pay out dividends; however, you can use EIDL funds for payroll – which includes your salary. With your salary, it is important to save for the future and invest.

Diversifying your investment portfolio can protect you from losing all of your assets in one tragic mishap and can potentially improve your investment returns. Seek professional advice before investing.

📌 Pro tip: Check out our article, 6 Common Misconceptions About The EIDL Program

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