With the new EIDL guidelines, businesses are able to use EIDL funds for various purposes, with some restrictions. The low-interest capital, 24-month deferment period, and long repayment terms make borrowing easier for businesses in desperate need. Each business is different and has different requirements, but here are seven legitimate ways to use your EIDL funds once you are approved.
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 new 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.
Set Aside Money for Rent, Mortgage, and Utilities
Once you pay yourself and rid your business of other high-interest rates, set aside some of the EIDL money 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 2022. 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, at least for a period of time, 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.
Get Personalized Help With EIDL
There are numerous ways you can use your EIDL funds to keep you and your business running. 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.