When the outbreak of the COVID-19 pandemic was at its peak, the United States Government introduced some measures that will help businesses stay afloat, and one of these measures is the SBA’s Economic Injury Disaster Loans program.
Entrepreneurs and businesses that received funds through this program were given low-interest loans that can be used to cover their day-to-day business operations.
This was a good relief package for businesses and entrepreneurs. The Economic Injury Disaster Loans program is the least restrictive of all the government relief programs and it allows entrepreneurs and businesses to use the loans as their working capital.
The Accurate Ways to Use Economic Injury Disaster Loans Program Grant
To Pay Salaries
One of the reasons SBA’s Economic Injury Disaster Loans program was introduced in the United States during the pandemic, is to ensure that employers (business owners) and employees are paid while businesses are shut down. This was the best thing that happened to small business owners in the United States.
Even though SBA’s Economic Injury Disaster Loans program funds can be used to pay business owners and employees, they cannot be used to pay dividends to shareholders or to pay employee bonuses, or any payment that is not linked to salaries.
Pay Off Other Non-Federal Business Debt
Another way you can use your SBA’s Economic Injury Disaster Loans program funds is to pay off other business-related debt. The fact that this loan comes with a 3.75% interest rate, means that every other business loan you take will attract higher interest rates hence you can use it to pay off such non-federal business debt.
Note that if you use this fund to pay off other debt, (especially those debts that come with high-interest credit cards) it will help you save your hard-earned money for your business. It will also help you consolidate other non-federal business debt into one low-interest payment package.
If your business has a website, you can legally use your SBA’s Economic Injury Disaster Loans program funds to pay for hosting the web. The truth is that many businesses could not pay to keep their website running during the pandemic because they were not earning money. Receiving EIDL funds came as a relief for them and they were able to pay their web hosting fee.
You can use SBA’s Economic Injury Disaster Loans program funds to cover your inventory. The fact that you need all the inventories to be intact for your business to stay afloat makes it an important aspect of your business that must continue to receive funding. This is why it is legal to use EIDL program funds to finance your inventories.
The SBA’s Economic Injury Disaster Loans program funds can also be used to finance office supplies. Just like your inventory, your office supplies are part of what makes the business activities ongoing. For example, if you don’t have a stamp and ink, or ink in a printer et al, you may have a business standstill. The truth is that you can rarely make business progress without these office supplies.
You can also use your SBA’s Economic Injury Disaster Loans program funds to finance your accounts payable. Your accounts payable are known as short-term loans; they are the monies you owe your vendors, supplies, short-term contractors, or anyone that supplies your products or offers services to you on credit.
Rent and Utilities
Many small businesses could not pay their rents and utilities during the COVID-19 lockdown, and the introduction of the SBA’s Economic Injury Disaster Loans program came as a relief.
This means that it is legal to use your funds to pay rent and also cover other utilities your business incurs on the day-to-day business operations. Electricity, gas, billboard, sewage, waste disposal, and other utilities can be covered with this fund.
Your SBA’s Economic Injury Disaster Loans program EIDL funds can also be used to pay your merchant fees. There are businesses that incur heavy merchant fees during the pandemic lockdown, and they were not able to pay up the money, and the interest on debt kept rising. But the introduction of the EIDL program makes it easy for small business owners to clear such debt.
Bookkeeping and Accounting Services
If you connect your business bookkeeping and accounting services to a service provider, then you can legally use your SBA’s Economic Injury Disaster Loans program funds to pay for it.
Online and Offline Marketing Expenses
You can legally use your SBA’s Economic Injury Disaster Loans program funds to cover your online and offline marketing expenses. It can be used to pay for and promote your business online and you can also use the fund to print fliers and other marketing tools to market and promote your business.
In as much as it is legal to use your SBA’s Economic Injury Disaster Loans program funds to cover your monthly financial obligations such as credit card and loan payments, however, you cannot use the fund to pay the balance of these debts as it would be considered refinancing which is not an allowable use of the EIDL program funds.
A good way to make sure you are on track with how you spend your SBA’s Economic Injury Disaster Loans program funds is to keep your money in a separate bank. This is because if are asked by the SBA, you can easily provide the bank statements to show the entire transaction history of how you spend the funds.