The new EIDL guidelines give business owners permission to use EIDL money for different purposes. Some of the EIDL restrictions that used to exist have been removed. Some of the exciting changes include a 24-month deferment period, low-interest capital, longer repayment terms, among others.
According to Lantern by SoFi, the EIDL loan is “available to small businesses, small agricultural cooperatives, and most private nonprofits in a disaster area that have suffered substantial economic damage.” Though every business is unique, there are certain ways that an EIDL loan should be used. EIDL loan requirements must be taken into account if a business wants to continue enjoying credit facilities from different lenders.
Below are five ways you can utilize an EIDL loan:
Some business owners are often reluctant to pay themselves. But the truth is that it is very important to pay yourself a salary. Although you cannot use EIDL loans to directly pay dividends to shareholders or bonuses, you can use them for payroll purposes. Paying your employees and yourself is not only lawful but also necessary for the business to keep running.
Once you have paid yourself and your employees, it is also important to put aside some of the EIDL cash for the purpose of paying rent or mortgage. It is highly recommended that you put aside money for at least three to six months.
It is good to give yourself peace of mind, knowing that all the business expenses have been taken care of. The other reason for doing that is because you don’t know how your business will perform in the next few months. Just in case you make losses, you are certain of carrying on without much pressure.
Under the new EIDL guidelines, business owners have a right to use EIDL money to pay off non-business-related debts. Because the interest rate for EIDL loans is 3.75 percent, any other business debt will definitely attract a higher interest rate. By using EIDL cash to settle other debts related to your business can save you a lot of money. Besides, paying off debts using EIDL funds basically consolidates your debts into single-low interest payment.
If you started a project several months or years ago and stalled because of a lack of funds, then this is the best time to pick it up. For clarity purposes, you can’t use an EIDL loan to expand your business, so ensure the project in question is not an addition. It would be good to talk to your local SBA office in case you want to make additions for safety reasons.
Marketing is a very important expanse for business owners. Increasing your marketing efforts, especially after the challenges brought by the pandemic, and give a shot in the arm for your business.
There are various ways you can use your EIDL money. You should ensure that funds go towards growing your business.