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The Economic Injury Disaster Loan Program Spending Guidelines

In addition to the numerous applicant businesses who have received funds through the Payroll Protection Program, they were also eligible for the Economic Injury Disaster Loan (EIDL) Program for which is also administered through the Small Business Administration.  Due to this additional program, the loans are NOT forgivable and have an interest rate of 3.75% for companies and 2.75% for private nonprofits, with payments of up to 30 years.

Now with regards as to how that money can be spent, there are a list of Do’s and Don’ts below.  As with every SBA program, these rules are subject to change.

Eligible expenses include:

  • Fixed debts (rent, etc.)
  • Payroll
  • Accounts payable
  • Some bills that could have been paid had the disaster not occurred.
  • Dividends and bonuses
  • Disbursements to owners, unless for performance of services
  • Repayment of stockholder/principal loans (with exceptions)
  • Expansion of facilities or acquisition of fixed assets
  • Repair or replacement of physical damages

Ineligible Uses of Loan Proceeds: EIDL proceeds may not be used for: 

  • Payment of any dividends or bonsuses
  • Disbursements to owners, partners, officers, directors, or stockholders, except when directly-related to performance of services for the benefit of the applicant
  • Repayment of stockholder/principal loans, except when the funds were injected on an interim basis as a result of the disaster and non-repayment would cause undue hardship to the stockholder/principal
  • Expansion of facilities or acquisition of fixed assets
  • Repair or replacement of physical damages
  • Refinancing long term debt with a repayment period of more than one year
  • Paying down (including regular installment payments) or paying off loans provided or owned by another Federal agency (including SBA) or a Small Business Investment Company licensed under the Small Business Investment Act. Federal Deposit Insurance Corporation (FDIC) is not considered a Federal agency for this purpose
  • Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations
  • Pay any penalty resulting from noncompliance with a law, regulation or order of a Federal, state, regional, or local agency
  • Contractor malfeasance
  • Relocation or moving outside of the disaster area (however, you can request written consent to relocate)

Extraordinary items can include:

*Temporary rent or storage fees, additional advertising costs, etc.;
*Accelerated debt due to the disaster;
*Inventory replacement may be an extraordinary item. For example, in the spring, a clothing store located in a disaster area is left with an inventory of winter clothing and has no funds to order summer stock. The cost of ordering summer inventory represents an additional need.

For a downloadable pdf copy EIDL Do’s and Don’ts to use as a guide.

Dwayne J. Briscoe

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