5 Reasons You May Want to Reconsider An EIDL Loan

5 Reasons You May Want to Reconsider An EIDL Loan

5 Reasons You May Want to Reconsider An EIDL Loan

On December 22, 2020 Congress passed the stimulus bill which includes new EIDL grants, new Paycheck Protection Program loans and other small business relief. Read more about that legislation and apply for a new PPP loan here.

“Should I accept my EIDL loan?” That question was recently posed to me by a friend who received an email from the SBA stating she was approved for an Economic Injury Disaster Loan (EIDL). She is not alone in her question. After weeks (or months) waiting for an approval from the Small Business Administration, business owners are now receiving offers along with paperwork that has them questioning whether or not they should accept the loan. 

Here are five reasons you may be wondering whether or not you should accept an EIDL:

1. You Aren’t Sure How You Can Use the Funds

This business owner who posted in the Business Loan Insight Financing Hub – PPP, EIDL and More on Facebook is confused about how funds may be used:

I NEED it, am still hopeful I get it, but all the “chatter” even has me second guessing. Can I use it for rent, for payroll, for utilities, for credit card bills (used when buying inventory), or are we “handcuffed” with how to use these funds?

These loans don’t come with specific instructions about how the proceeds may be used so it is confusing to many small business owners. 
EIDLs are described this way in the Standard Operating Procedures (SOP 50 30 9)  for Disaster Loans:

Economic Injury Disaster Loans (EIDL): Working capital loans are available to assist small business concerns … in order to meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. These loans are intended to assist through the disaster recovery period.

Many business owners aren’t sure what “working capital” means, however, and the SBA SOP doesn’t spell out acceptable uses in the SOP. It is clear about how you can’t use these funds, though: 

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

1. Payment of any dividends or bonuses; 

2. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant; 

3. 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; 

4. Expansion of facilities or acquisition of fixed assets; 

5. Repair or replacement of physical damages; 

6. Refinancing long term debt (see below); 

7. 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; 

8. Payment of any part of a direct Federal debt, (including SBA loans) except IRS obligations. (Additional requirements regarding the payment of federal debt start on page 75 of the SOP.)

9. Pay any penalty resulting from noncompliance with a law, regulation or order of a Federal, state, regional, or local agency. 

10. Contractor malfeasance; and 

11. Relocation

Note that when it comes to item #6 in that list, “long-term debt” means debt with a repayment period of more than one year, according to Generally Accepted Accounting Principles (GAAP),” explains Steve Burke, Western Washington Regional Manager with the Washington Small Business Development Center.

Some business owners are also confused about whether they can use funds to pay themselves. According to the Wisconsin SBDC, “Owners can apply for EIDL and PPP and consider their own draw as a ‘payroll expense’ as long as they can provide documentation of that person’s draw.” Indeed, the SOP (page 186) lists “owner’s draw/salary when the draw is both normal and essential” under “normal obligations, which the business would not be able to meet throughout the remainder of the injury period.” 

EIDLs may also be used for “extraordinary items” which are defined as “needs outside of normal operations and directly caused by the disaster.” The SOP states:

Extraordinary items can include: 

(1) Temporary rent or storage fees, additional advertising costs, etc.; 

(2) Accelerated debt due to the disaster; 

(3) 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.

Note, these are examples of some of the acceptable uses of these funds, but not a comprehensive list. 

Remember there is no double-dipping if you get an EIDL and a Paycheck Protection Program (PPP) loan. In other words, you can’t use funds from both programs for the same purposes. And paying yourself with an EIDL may impact your ability to receive Pandemic Unemployment during the same time period. 

Read: 5 Ways You Can and Can’t Use Your EIDL Loan

Merchant Cash Advance (MCA): What is it and How to Use It 

2. You Are Worried About Your Credit 

Over the weekend, I received an email from a business owner who wanted to know:

I have been approved for an SBA (EIDL) in the amount of $15,000. Does this debt get reported on my credit? I already have mortgage debt, etc and I am concerned about adding new debt on top of that with this loan.

Individual lenders report SBA loans (including 7(a) loans which the PPP program falls under) to credit bureaus, the SBA itself doesn’t report to credit reporting agencies. Since these loans are made by the SBA, EIDLs should not appear on personal or business credit reports. However, for loans of $25000 or more, the SBA files a UCC-1 filing which can appear on business credit reports and may impact your ability to get other financing. 

3. You’re Worried About Having to Repay A Loan

Many business owners are still facing massive uncertainty about the future of their businesses and are reluctant to take on debt. In a discussion about EIDLs in the Facebook group mentioned earlier, one business owner commented:

I added a 150k loan to my books on a test run. Wow. not good. Backed those out of my Peachtree (accounting software) super fast!

As far as loans goes, EIDLs do have a few advantages: 

  • Low interest rates (3.75% or 2.75% for nonprofits)
  • Repayment periods of up to 30 years
  • Payments deferred for twelve months
  • No collateral for loans of less than $25,000
  • No personal guarantees for loans of less than $200,000

However, these are loans with stipulations and limitations on how you use the funds. Keep in mind, a default may affect your ability to get other federally guaranteed loans in the future. 

4. You Aren’t Sure You Need the Loan

One Facebook commenter was blunt in their assessment of the debate around whether to accept an EIDL, stating that if you don’t really need the loan, don’t accept it:

After all the cursing I’ve done over the inefficiencies of the SBA and government in general, I was wrong the whole time. The problem is the people who are abusing the entire system and trying to scam or otherwise misuse the funds and what they are truly meant for.

Many applicants are genuinely confused and worried about the future of their businesses. In the rush to respond to the COVID crisis they applied for every program possible, and are now trying to decide how to move forward. 

But there are also those who see this as an opportunity to take advantage of low-cost funding even if they don’t really need it. A report by the Inspector General reviewing previous disaster loans found that “SBA issued EIDLs and non-EIDLs to businesses that did not suffer an economic loss or to businesses outside the timeframe of the disaster.” 

5. You Wanted a Forgivable Loan

One commenter on the Nav blog article, Frequently Asked Questions about EIDLs, wrote:

I received from the SBA an email approval for the EIDL loan at 3.75% interest. Is the EIDL loan forgivable? I have not received anything (info/money) regarding the EID grant? Is the EIDL and EIDG different? What can I do now if I want the EIDG and not the EIDL?

EIDL grants (advances) don’t have to be repaid. By contrast, Economic Injury Disaster Loans are not forgivable and must be repaid. 

Some borrowers applied for EIDL because they wanted the grant of up to $10,000. (The grant is being administered at $1000 per employee). The application for both go through the same portal at SBA.gov. 

If you receive the grant, the funds typically just show up in your bank account and the deposit includes the notation “EIDG” for EIDL grant. Just because you receive the grant doesn’t mean you have to accept the loan. 

The loan, by contrast, will require you to accept and agree to the loan terms from the SBA before funds are approved and disbursed. 

How to Make an EIDL Work for You

If you are unsure how to use your EIDL funds, talk with your accountant. You can also connect with your local Small Business Development Center or SCORE chapter which offer a variety of free services to small business owners. Many are providing free education and assistance to businesses impacted by COVID-19. SCORE mentors are also providing free online mentoring on its website, SCORE.org

Here are two of the best tips we’ve heard when it comes to using EIDLs the right way:

  1. “Consider using a portion of your disaster funding to pay for an accountant or CPA to review your current financials, if you haven’t done so in the past. Catching issues on the front end will save headache and heartache on the back end,” advises Mickie Lewis-Gemici, Regional Director of the SE Colorado Small Business Development Center
  2. “Business owners should do vigorous cash-flow forecasting month by month for the next twelve to twenty-four months” recommends Burke. 

EIDLs can help businesses stay afloat during the pandemic. But they also require the business owner to get crystal clear on the businesses finances, so they can decide if these loans work for them in the long run.


This article was originally written on June 9, 2020 and updated on January 11, 2021.

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221 responses to “5 Reasons You May Want to Reconsider An EIDL Loan

  1. Gerri,
    Has anyone returned their funding after disbursement when they realized they couldn’t use it? If so, how do you do that?

  2. My husband applied for an EIDL and he was approved for $72,000. I am really nervous to even use the money because I don’t want to misuse the funds. My husband has an S-Corp and he has been a private contractor for many different companies over the years. He just started selling for a Solar Company. He does door-to-door sales. I know we don’t need that much money and I am actually hoping we don’t need it at all. If we do use it, he would be using the funds to pay himself a salary to help supplement his income until he is able to bring sales in consistently. We would also use the funds for gas and to pay our accountant. Other than that, the business doesn’t have any other expenses. Would that all be acceptable uses of the funds?

    A part of me just wants to give it back because I don’t want to be penalized for mostly using the funds to just pay his salary. This loan at first seemed like a blessing, but now I am not sure. I just don’t want to take a dent on that we will regret down the road.

    1. I’m not trying to scare those who legitimately need the EIDL funds! If you are nervous you can always talk to an SBA resource partner such as your Small Business Development Center (SBDC) or SBA District or Regional office. They help for free. You can find your local SBA partner here.

      (Has he considered PPP? That would be completely forgivable if spent properly – which can include owner’s compensation. More info here.)

  3. I am contractor that own a small cleaning bussiness. Sba just went to mybank account and took they loan back that i was appoval to receive 5000 from eidl Grant. why is that happen the grant suppose to not. Be repay back?

  4. Hello Gerri,

    I a, self employed and have 2 businesses. I applied for 2 EIDL loans. One for 150,000 and the other for about 73,000. I got all the way to the last steps where I was then denied. “During the loan underwriting process there were one or more items that were reviewed that caused the SBA to question the validity of certain information you submitted as part of your application”. Both companies are relatively new (since 2017) and 2019 was my best year. I filed 2018 and 2019 in July of 2020 and IRS still has not posted to my account. I am stuck because I do think they believe the income but they are taking so long to post my returns. I am in jeopardy of losing my businesses now. I need an expert in this matter.

    1. Hi Jonathan,

      I am not personally familiar with experts who can help borrowers challenge EIDL loan rejections. One suggestion is for you to reach out to your elected officials in Washington and see if they will go to bat. Each Senator and Representative have staff members whose job is to help constituents navigate problems with federal programs. I am not sure how quickly that will help but it’s certainly one option.

  5. I received an EIDL loan for $17,900.00.

    So far I’ve not had to use any of it.

    My question is….. Can I keep the money and simply pay the loan back at the interest rate over the 30 years as agreed or must I pay it back in full with the accumulated interest at the end of the 12 month payment deferment?

    1. You can pay it back early without penalty. As for keeping it and paying it off over 30 years, EIDL is supposed to help a business recover from the disaster. If you didn’t need it but don’t pay it back promptly, that may be problematic. I would recommend you check with the SBA.

  6. Hello, I was approved for sba loan and funds were sent to bank. However the the funds were sent in my business name instead of my name, so it was sent back to depositor (sba). So that was on June 21.2020, I updated bank information on 8/12/2020. Still haven’t received payment. So I called today an really nice agent informed that my account information still shows funded and old bank information. So where do I go from here?

    1. You will probably need to work with your bank and the SBA. The SBA should show that their attempt to deposit the funds was returned and that they need to resend.

  7. We are a trailer dealer & truck upfitter. Is purchasing inventory to resale considered fixed assets? That is what we do…resale…have a state license.

  8. Hey Gerri,

    Fantastically thorough & informative article. That said… I still have a question. If my business is approved for a $150,000 EIDL, what happens should I sell my business (an S-Corp) before the loan is repaid? Does the new owner assume the debt or would I be personally responsible for clearing the debt before the sale of (and ultimately my removal from) the company?

    1. That’s a great question Ash. Unfortunately I don’t know the answer and I don’t see it readily available in the Standard Operating Procedures. I’d recommend you contact the SBA with that question.

  9. I got approved for 56,000 eidl loan if I pay back the loan before the year the first payment is due I still have to keep records for three years of funds being used for the Sba

  10. hello i got approved of $56k but my account limit is $20k, can i edit and use someone else’s account info to recieve the payment since i cant get that sum in my account????

  11. We initially applied for the EIDL Grant, but by the time we applied, SBA closed it due funding ran out. So, we applied for the loan thinking it was the grant. We got approved for the loan. We really prefer the grant. We’ve calculated the 3.75% interest for the loan, and the interest amount at the end of the term will be more than the loan amount itself. So, is it possible to return the EIDL loan and apply for the upcoming EIDL grant?

    The CARES ACT is suppose to help small businesses. But with the interest amount surpassing the loan amount itself, how is a small business suppose to pay back the additional interest amount when it’s already suffering? Please advise. Thank you.

    1. I’m sorry we missed this comment Josh. Whether or not you returned the loan should not have affected the grant. I don’t know why you didn’t get the grant in addition to the loan unfortunately.

  12. Hello Gerri.
    I am completing my quarterly report ST-50 and I received $1K grant in May 2020, should I include that amount in it? Also,
    what does it mean if it is forgivable or not? Is it? if it is should I include it there?


      1. I found some information online:
        How the EIDL advance affects taxes

        The Economic Injury Disaster Loan (EIDL) is a loan option available through the SBA to help businesses struggling with financial hardship due to COVID-19. While it is a loan and doesn’t have any special treatment when it comes to taxes, there is one thing that may affect your taxes: the EIDL advance.

        The EIDL advance is technically a grant for small businesses of up to $10,000. Because it’s a grant, it’s not part of the loan that needs to be repaid. That means it’s going to be treated differently than a loan on your financial statements and your tax return at the end of the year.

        Unlike the PPP loan forgiveness, this grant will probably need to be included in taxable income. This isn’t definitive because the IRS hasn’t specifically said that this advance should be included in taxable income, but previously they’ve been pretty clear that any forgiven SBA loan amounts need to be included in income.

        If you received an EIDL advance for the maximum amount of $10,000, that money will need to be added to your taxable income at the end of the year. But if it’s added to your taxable income, you’ll be able to deduct any expenses that you use to pay for this grant.

        For example, say you received an EIDL advance of $10,000. You’ll increase your taxable income for the year by that amount. But you also used all of that money to pay for some of your business expenses, like inventory and rent. You’ll get to take that $10,000 that you spent as a deduction against your taxable income, which means you won’t pay taxes on the money you received.
        Please let me know if this is correct, thanks

    1. Is that a New Jersey tax form? I don’t know if they are taxing those grants but the stimulus bill passed 12/27/2020 makes it clear EIDL grants are not taxable at the federal level.

  13. I applied for the eidl and got the email to create an account and verify identity, did that, then it told me it was being processed for a few weeks, then today get the email saying I’d been approved and to sign the closing documents….did that. Now what can I expect? Is there anything else I should do? When will I see the money?

  14. Hello.
    I am a one man show here and work out of my house. So no rent or utilities here. I do sales and service form home and on the road.
    I received a $15,000 EIDL on June 9th. I applied for it on April 7th and haven’t heard anything till it was offered to me on June 6th.
    I did receive a PPP loan before receiving the EIDL. My PPP loan ending on July 3rd(8 weeks pay). Can I use money from the EIDL to pay myself?

    I have a small list of bills needing to be pay for my business and am wondering if I can use the EIDL for them:
    Phone(WOW, T-Mobile & Fusion) & Internet(WOW) – Company Liability Insurance payments – Auto expenses – Gas, Oil changes, tires, battery & any repairs
    UPS Charges – shipments I make of new equipment, repaired equipment or any supplies that I ship to customers – Vendors – any new equipment or supplies I purchase for stock to sell to customers – Office supplies – weather I purchase from Amazon, Sam’s Club, Staples or wherever (copy paper, ink, folders, ect) – Credit Card Processing Fee’s
    Storage unit payment – for office equipment, files & used equipment I received when my partner retired(no room at my house for this) – Parking fee’s – when I go to customer locations for deliveries or repairs – State of MI – sales taxes – and for accounting services

  15. The EIDL is telling me I’m eligible for a certain amount. Do I have to accept it in order to get grant? How do I know if I’m eligible for grant?

  16. May I pay off a business credit card even if the business debt occurred before the pandemic, or am I just able to pay the minimums? If we bought a truck in our business name using our business EIN in 2017, can we pay off that loan with EIDL funds? We had hoped to pay off the truck this year with income from our business, but the pandemic hit.

    1. My understanding is that credit card debt is short-term debt. But I don’t speak for the SBA so please check with them if you have questions about your situation.

  17. Will I be charged only on the amount I use from the eIDl loan? For example if I get $100k and only use $50k will I pay on all of the $100k or just what I am currently using ( the 50k). Don’t wanna turn down full amount, especially with the uncertain future of shutdown. Just curious?

  18. what if you’ve received an EIDL loan under 20k and haven’t used any of the money and want to return it (asap) because you have decided not to move forward with reopen your company, how do you return it is there an application to do so or what

  19. This is the best explaination of these loans I have seen. The SBA offers very little on their website in the way of understanding these loans.

  20. I received an email stating I have not completed the steps to complete the loan application. But I don’t want the loan due to the advance already received in my account. Will withdrawing my loan affect my advance??

  21. Are you allowed to use EIDL funds for payroll costs after you have used up the PPP funds or is that considered duplication of funds?

  22. I own my own photography business (sole prop.) and haven’t been able to take on the same number of clients/shoot weddings. I did qualify for a $20k EIDL, but I’m not clear if I can pay myself from it. I also received a PPP that covered my ‘salary’ for two months. Now that has been used up, does the EIDL take it’s place? Even if I’m still not taking clients?
    2nd question – can I use it to pay CC debt if the CC isn’t specifically a business CC, but is used to business purchases?
    And finally – can I use it to pay my monthly health insurance?

    1. Jen – My understanding is yes you can use it pay yourself as you normally but you can’t double dip with PPP. The other expenses you mention sound like they would be acceptable as well. But I’m not with the SBA so don’t rely on this as advice. Feel free to check with the SBA or an SBA resource partner. More info here.

  23. Forgive me if this is redundant. I cannot access the loan terms online for some reason so am asking here.
    I was offered a small loan (11k) which I have yet to accept. I would like to take it and would also be keen to pay it off in less time than the 30 years if it is possible (I do not like having debt!). I have read in different forums that I would be forced to continue making small interest payments for the entire 30 year term even if I pay everything off early… is this true/possible? Thank you in advance.

  24. Hi, is there a document where I can read how the SBA determines the EIDL loan amount? I’ve seen places where it says it’s generally based on 6 months of operating expenses, but nothing from the SBA that says that. Mine was approved for much less than that. I’d like to request reconsideration of the amount but want to be prepared with the facts before I do.

  25. I got $25,500.00, from EIDL, last weeek SBA placed UCC filing on my business credit for 29 years. Is this a normal standard

  26. Well first I would like to thank you for the very interesting blog.
    My question is regarding the eligibility for EIDL for a person who has two jobs and gets W2 from the first job and 1099 from from the second one. Is it possible to apply for EIDL
    with just the 1099 FORM from the second job?

    Your help is much appreciated!


  27. I am a gig worker and have been approved to created a portal for the EIDL SBA loan, unsure how much I qualify for at this point as I have not proceeded.
    If I get approved for a loan, is the interested added on immediately? Meaning if I apply for 25K, does the 3.75 get tacked on at the front of the approval, or is that interest added on over time?

    While I have not been paid since March, I am trying to gauge whether I should get the loan as I am unsure what the next year is going to look like as all my customers contracts are currently still on hold. I may get good news in a month or less and I would hate to tack on the interest fees if I end up not using it and just paying it all back.

  28. I realized I made s couple of errors however submitted app and received confirm number , how can I make corrections . I may not qualify if I do not make those changed.

  29. I received $52.000 from EIDL as small trucking company INC. I am the owner and the one whos driving the truck.
    I got a semi truck and the trailer. If anything happen to my semi truck or trailer got forbit broke down can I use the funds to buy another one and send it for scrap the broken one?

    1. Ed – it is our understanding these funds aren’t to be used for purchasing fixed assets but we can’t speak for the SBA. We recommend you direct these questions to the SBA Disaster assistance hotline at 800-659-2955.

  30. Hi
    I received$ 42000 from eidl sba loan as an independent contractors. I’m Uber driver. I have Rental car. Can I use this loan to pay car Rental instalment fee, Gas, house rent, utility bills, phone bills? Thank you

    1. I got approved for 150k EIDL but haven’t received funds yet and it’s been 2 full days already how long does it normally take after approval?

  31. It only took me a week to get approved for $7,000 for the EIDL. I got denied for PPP so went ahead to apply for the EIDL with the assumption that I would receive a $10,000 grant on top of it. I was informed that I would automatically receive the grant prior to me even getting approved directly to my bank account. As I said I’ve gained approval for the loan but got no grant. Could anyone tell me why this might be. I am an independent contractor. Im a sales training manager for a small marketing firm which conducts door to door sales for a third part electricity supplier.

    1. Jonah – the 3 scenarios I can think of are:
      1. You forgot to check the box requesting the grant
      2. You didn’t list any employees (I’m not sure how they are handling that)
      3. There was a typo in your bank account information that meant you didn’t receive it.

      Have you tried reaching out to the SBA?

  32. I just got approved for $1000 loan but I put in 1 employee when I meant to put 10. I haven’t accepted it. What do I do to get that changed.

    1. I have not been able to find out how to get reconsidered for the grant. You’ll have to check with the SBA. I’d suggest you try calling the SBA Disaster Assistance hotline. Will you let us know what they say?

  33. I received a $400,000 PPP and also a $500,000 EIDL. My questions are in regards to how my EIDL can take over after my PPP for allowable expenses and have that portion of my EIDL forgiven. To make a long story short my bank did not follow the guidelines of my PPP loan. I was eligible for $531,000 of PPP but they only allowed me $400,000. I’m following all the guidelines but my PPP true dollar amounts of expenses fell short and I have all of the unused EIDL money. Can I use some of the EIDL money for allowable expenses and have a portion of my EIDL forgiven somehow?

      1. I used a bank card that only loads up to $9,500. What can I do to change my bank and routing info to receive my grant for 10,000??

  34. I received the grant. Can the grant be used to pay for fixed assets like a computer for editing?
    Additionally I started my business during the pandemic March 28th, 2020 and I did get the $1000 grant (I was honest about the start of my business and that I had 0 income in 2019) but now that I’ve reread eligibility requirements it looks like I was supposed to be in business prior to January 2020. Any tips on how I should proceed?

  35. Can you still qualify for an advance if you had to correct the banking information you entered for your business? And also will reapplying hurt my chances to receive the EIDL grant now?

  36. What happens if you spend the funds not allowed ? It’s very Vague on what I can use it for. Can I stock up on inventory pay off all utilities that are behind buy a new company vehicle rent utilities? Thanks

    1. Tim – EIDL funds are working capital loans available to help small businesses meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. According to the SBA guidelines, “Economic injury loan proceeds can only be used for working capital necessary to carry the concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury.” I recommend you talk with your accountant and/or an SBDC advisor for advice on specific uses of the funds. If you receive more funds that needed you can pay the loan back early without penalty.

      1. How fo I return some of the EIDL money to the SBA. I do not need it all on do not want to pay interest on it.

  37. Hi,
    I am a uber driver (independent contractor) and received 41k EIDL loan as an independent contractor. Can I use EIDL loan to buy vehicle for driving uber because driving Uber is my only source of income for last 3 years.
    My concern is that as SBA mentioned that they will audit the loan amount after 2 or 3 years. So can I be able to show up that I spend the loan amount buying a vehicle for uber.
    I really appreciate it for your help. Thanks

    1. Sam – Ineligible uses of EIDL proceeds include “acquisition of fixed assets” and fixed assets usually include fleet vehicles. However, I don’t work for the SBA so I can’t advise you specifically. I’d suggest you call the SBA Disaster Assistance hotline or talk with an SBDC advisor.

  38. I am a self-employed independent contractor. I just got approved for a 20,000 loan. My question is can I use these funds to pay for bills such as credit cards and other items I pay for, or do I need to pay myself a “salary” every month into a separate account and then use the funds to pay for bills and other expenses, some of which are on my Schedule C and some are just personal expenses? What is the best way to use these funds since I’m a 1099?

    1. Kathy – You’re talking about an EIDL loan? EIDL is not a personal loan so you should not use it to pay personal expenses. You may pay yourself for services rendered to your business. It’s a good business practice to pay yourself from a business bank account.

  39. I applied for the SBA loan and I haven’t received my advance payment or a loan and I applied ever since March

      1. I understand that there will be a blanket lean on all owned assets is that true?Alsocan you request a specific amount? Thanks

      2. I have applied and got denied for loan and I have employees listed will.i recieve the grant automatically?

  40. I received & accepted a loan approval for $38K, thinking I could pledge one item as collateral. After, reading the loan docs, it became clear that a blanket lein will be placed on all assets. This information was not provided to borrowers anywhere on the SBA application or website. I have not signed the loan docs & have been trying to get the loan reduced under $25K & receive a revised loan agreement. I’ve read some comments of other borrowers with the same issue – all of whom or getting different answers from SBA. One person stated that they were told to decline the loan & reapply; however, an SBA Rep told me not to do that, but to send an email via the loan portal, which would go directly to a loan officer; however, I have not received a response. Yesterday, someone posted a comment stating that an SBA Rep. told them, “take the loan or leave it”. In other words, they will not revise the loan agreement. If this is true, then it is quite unfair seeing that SBA did not disclose “blanket Lein” for loans over $25K. Also, SBA is reconsidering thousands of applicants for “more money”, so why not reconsider for “less money”? Lastly, I never received a call from a loan officer, so I don’t his/her contact info. Any Advise?

    1. Rene – I don’t have any further details on how to modify the loan after it is accepted. I wish I could help. You may want to reach out to your elected officials in Washington as this is a federal program.

  41. Hi
    I just got the loan, but my business doesn’t need that loan either. Can I return the money if I haven’t used it? – How do I get the money back?

  42. I am a gig worker (independent contractor) and received 1k in my account, it does not say EIDG or even EIDL – but rather SBAD Treas ###.
    I received my portal link and it says approved for $1,500. Is that in addition to the 1k which I assume is the grant? Or should I accept $1,000 of the $1,500 approved amount?
    The portal specifically says loan. I guess I’m confused what is the loan and what is the grant. Is the grant included in the approved loan amount or is that already taken care of now that it’s been deposited?

    1. The grant and loan are separate. Grants are in $1000 increments so I assume the $1500 is a loan. (The portal page should show a monthly payment for the loan – does it not?)

      The grant is typically deposited directly into the bank account provided at application with the notation EIDG. You don’t normally have to accept it.

  43. Thank you for this thorough article. My question is what can you use the advance/grant on? Does it have the same or different regulations as the loan? Thanks

    Also can you apply for the ELDI if you are an independent contractor part time and receive a 1099, but you also have a w2 full time job?

  44. Hello I applied on the sba website. There was tick box indicating if I was applying for the loan or grant. I received an email from SBA with documents to pay back 3.75%. Is this the grant? How do I check or go back? I’m afraid to sign. I’m an independent contractor and i can’t afford a loan even if I can approve.

  45. The UCC strap applies to loans OVER $25,000 not $25,000 and over. A business can have a non-collateralized $25,000 EIDL. If they ask for anything OVER $25,000, there will be a $100 UCC added to the loan administration and deducted from the deposit to the business.

      1. I applied for the EIDL when first available on the SBA website. I finally got approval months later for $40,000, but it took so long I had to lay off half my employees. I now need less than $25,000 and I don’t want to be constrained by the collateral requirement. If I accept the $40,000 but immediately pay back more than $15,000 will the loan still require collateral?

  46. I recieve PUA since I was unable to operate due to Covid 19. Of course PUA won’t last forever. Unfortunately in my small town a lot of people who weren’t restricted by Covid started doing the job I was doing and now I know I won’t stand a chance. Would I be able to use EIDL with my current funds to help start a whole new business?

  47. Trying to decide if I accept this loan. We are a nonprofit under section 501c3 and have been approved for an EIDL. Reading through the SOP for Disaster Loans, it clearly states on page 79 of the PDF that nonprofit organizations that are not considered private nonprofits are ineligible. Why would the organization have been approved for a loan?

  48. Hi. Great information, thanks. I was approved for an EIDL of $150k. Then, after they ran my credit report, the loan was denied. Am I Abel to reapply with a co-signer or raise my credit score?

    Thank you

  49. So much information available on what NOT to use EIDL funds for , but I’ve yet to find a detailed list of what fund CAN be used for .

  50. I applied as an independent contractor since my tlc medalluon is on my name not on a corp and i got it. But I also have a different business using an s corp and I applied for that also but I got this “We have received multiple applications from your business for economic injury as a result of Coronavirus (COVID-19). Your earliest application will continue to be processed and we have withdrawn application number 3000109*** from active consideration.” What should i do

    1. Robert – I would recommend you talk with your accountant. Your rent is probably a combination of personal and business expenses, and these loans are business loans. However, you may pay yourself for services in our business and perhaps you can use those funds for your rent.

  51. Hello,
    A collegue of mines asked if she decide to not utilized the funds in the 12 months can she simply give it back when the 12 month payment deferment expire

  52. I’m an independent contractor in addition to having another job. I teach one-on-one lessons in the early mornings to students for my client. My booked classes are half of what they were, so I applied to get the $1,000 grant. I plan on using it for business expenses such as internet and utilities.

    I was also approved for a $3,000 loan. I called the helpline and the woman I spoke with said that I could pay myself as I’m an independent contractor (she left the line to ask someone else). She didn’t seem to know what to say when I asked about documentation, so I was hoping you could give me some suggestions as to what type of documentation I should use for this. Would it be acceptable to put the loan money in my savings account and pay bills and myself (separately) and note what the transfer is for (pay, internet, etc) Or, would it be better to open up a business bank account instead. I could put the loan in my savings account Or, can I simply note how much I paid myself from the loan. My contracting money is deposited into my checking account monthly. I typically just save my business receipts for my tax preparer and put aside money for taxes.
    Thanks, Angela

    1. Angela – Talk with your accountant. Generally it’s a good idea to use a business bank account for all business income and financing. You can then pay yourself out of the business bank account and have records that you did so.

  53. I received the EIDL loan and the payments are deferred for a year. Does the interest on that loan start 30 days after receiving it? I am currently not using it as I have the PPP. If it starts accruing interest 30 days after it deposits in my account should I just return the loan quicker as I may not need the full amount but only a portion? So the accruing interest in the total amount?

    1. Eddie – business credit cards are generally short term debts, and while you can’t refinance long-term debt there is no specific prohibition on paying short term debts. We can’t speak for the SBA so we recommend you check with the SBA or your SBDC for more guidance.

  54. Do I need a business bank account to receive the funds, I closed my account when I didn’t have any funds coming into my account due to lack of businessm

    1. It’s our understanding a business bank account is not required. But we have had some business owners tell us they were told otherwise. You’ll need to check with the SBA.

  55. hello
    I just received my Eidl which is less than 20000 , do I have to use the whole amount on issues that is related to my business , can I use part of the loan on my personal and family situation as my personal rent and other stuff ?
    thank you

    1. No you cannot use EIDL to pay personal expenses. It is a business loan. You can pay yourself for services you provide in your business (but not distributions) and then use the funds you have earned to pay personal expenses. However, I’d encourage you to make sure the amount you pay yourself is reasonable and in line with what you paid yourself in the past. If you need help, call the SBA Disaster Assistance hotline or talk to your local SBDC or SCORE mentor.

      1. To pay yourself a reasonable amount for services (the same amount previously paid via the PPP and based of 2019 average), can these payments be made directly or do you need to setup payroll? With direct payments, the position would be that these are salary equivalents and not profit distributions.

  56. The exception of paying IRS obligations is very vague.
    It seems a business owner can use the loan to pay off IRS obligations. There are no guidelines saying to what extent.

  57. I applied for the loan just to receive the grant, and it worked! The money was in my bank account in a matter of days. Here’s my question…

    Do I still have to do anything with the loan I was approved for? Do I have to decline the loan in some official capacity or can I let it languish, unclosed, and keep my grant/advance?

  58. Would it be possible to use an EIDL to pay off higher interest business credit cards? Or is this against the use of funds? The amount is under $20k, but a 3.75% interest seems to make more sense than a 20.99% interest to a big bank.

    1. Tim – The Standard Operating Procedures state the you cannot use EIDL for refinancing long term debt. Generally credit card debt is considered short term debt, however. Would you have been able to pay that debt had the disaster not occurred? If so it may be an acceptable use. However we don’t speak for the SBA.

  59. Nevermind. I waited on hold for 2 hours and was able to make a one time payment of the full amount.

  60. I am a Uber driver and i got approved for eidl loan. Can i use it to switch business industries and start new business?

    1. Lorenzo, I don’t think so based on our understanding of the guidelines. EIDL loans are supposed to be used to cover working capital expenses the business could have paid had the disaster not occurred. We recommend you consult an SBDC advisor for clarification.

  61. i am not eligable for any thing.but i need to know if i have SBA present loan and can i refinance with some extra amount so i could pull through out of this pandemic .i don’t have
    any other loan and good equity in the property.i am current on every thing.i think up comming days to end meet will be very tough NO BUSINESS

  62. Hi there. We received and were funded $135,300 loan. We had not read the small print and like many others, we were in a rush to get any and all help. We were actually shocked when the funds showed up. Now that I have researched this (like I should have before I signed everything) I am seeing this a real bad deal. Can I just give it back? Everyone keeps saying to just return the funds. But nobody is telling me exactly HOW to return 135,300. I don’t want to just write a check, do I? I am currently on hold, on 1hr and 49 minutes to go, with the SBA. I am hoping they will give me an answer. I thought you may know.

    1. I wish I had the answer for your Rebecca! First, before you decide it’s a really bad deal you may want to meet with your Small Business Development Center (SBDC) to discuss your concerns and find out what makes sense for your business. They consult with small businesses for free and are familiar with SBA financing.

      If you do want to repay it I know you can do so without a prepayment penalty but I’m not sure exactly how to do that. Does the portal allow you to make a payment to pay it off?

      If you get more information please share!

  63. I have a travel business (which has imploded, of course) and received notice from the SBA to continue the process for an EIDL. I have been receiving the minimum disaster unemployment benefit for six weeks so do not want to use EIDL for payroll. I am considering the following uses, which are not listed on the ineligible list, but I am trying to figure out if they are ok.

    1. Additional professional memberships and industry continuing education/certifications that I had planned to undertake this year. I do not have the cash flow I expected when I started this year, but these will give me the chance to improve my standing and expertise as I try to cultivate new and returning business.


    2. Refund a small portion of client monies that are being held in Europe with no refund available from suppliers due to emergency decrees of various governments allowing suppliers to offer vouchers only, rather than cash refunds. This would mean a tiny, tiny payout to about 30 people, nowhere near what I cannot recover for them, but better than nothing. (Clients knew that deposits were not refundable but I still wish I could do something.)


    3. Purchase and ship branded promotional items for marketing purposes as I try to keep clients thinking and hoping about future trips.

    (I was also hoping to buy a new computer this year but cannot spend the loan on fixed assets.)

    1. I can’t speak for the SBA but these sound like normal business expenses the business would have paid had the disaster not occurred. Many SBA offices are holding office hours where you could ask a question like this, and your SBDC is another good resource that helps businesses for free.

  64. Am I able to change the amount requested once I have applied? I have not accepted the offered loan yet.

      1. I got approved for the EIDL loan I’m an independent contractor I used my car for work can I pay my car off currently I’m not working since March 2020 due to COVID-19 I have a lot of expenses on the work i do.thanks

      2. Gerri, how would I go about applying for reconsideration? Any guidance or help you could offer would be greatly appreciated.

      3. I don’t need the loan because I don’t want to have more headaches with too many bills. However, please reconsider for our situation, all we need is to get some money to cover for our losses due to disaster. Thanks for your support

  65. I applied for eidl I got turn down they said my type business did not qualify I have 3 rental Mobil homesem

  66. I have not received anything from the EIDL loan or the SBA loan I was wondering what’s going on with my status

  67. i would like an eidl loan but i’m not associated with agriculture. will EIDL reopen to non agricultural? if so, when?

  68. I cant seem to find answers for these questions about the EIDL loans…

    1) How long do you have to use the funds? Is there a time limit on using the funds?
    2) How will the use of EIDL funds be reported to the SBA? Is there a form that will be submitted or will it be reported only if the SBA requests documentation?

    Thank you

    1. 1. According to the SOP,”Economic injury loan proceeds can only be used for working capital necessary to carry
      the concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury.” The coronavirus crisis is still an ongoing crisis and it’s hard to know when it will end.
      2. You don’t report how you spent the money to the SBA but your loan could be reviewed in the future so it’s recommended you keep good records of how you spent the funds.

  69. Hi Dear Gerri, Thank you for all the good infos to viewers of business owners. As we know in business field, I’m just wondering of that any business can be transfer to new owners in any time for all the reasons for the businesses. After taking advantage of eidl loan with low rate with the lenght of terms more than transferring to new ownership in future, in case, how can business owner pay any left over of eidl loan? Because no new ownership can take the old loan to them to pay to old business ownership’s lender.
    If you can give the info to us or not, we still Thank you for your article!!

  70. I’m self employed with no employees. In my case, I applied for EIDL April 3rd. Yesterday I received approval for $3500 for the loan, but I haven’t received any grant money.
    Someone at the SBA said they count me as an employeed for purposes of the EIDG so I should get the $1000. But nothing yet.

  71. I’m an aesthetician in a salon in Huntington Beach. Of course I lost a lot of work in the last three months due to COVID-19. I’m Checking availability for getting small loans. I have required very high interest rate small loans to get me through this. And I’ve lost business I would be looking for a loan for about 20,000 or more. My credits not perfect. My question is do you do the small loans .. can I get a small loan.. it seems small business people like me are having trouble getting these loans instead of a large company. Thank you

  72. Very clearly addressed my questions. I wish I had read this prior to accepting EIDL loan. I’m not sure I would have taken it

    1. Thanks David. I’d be interested in hearing your concerns. I’m not trying to scare borrowers from taking these loans – they can be very helpful in the right situation. But it’s important to understand the pros and cons.

  73. Can you please let the author know that the note does indeed require a personal guarantee signature, and they add language that shouldn’t be there! They say there is no pg,but every paragraph on the note is nothing but pg language. The signature line is filled in,and cannot do a corporate signature,only name. I emailed back and forth with Jovita Caranza about this,and last email was take it or leave it.

  74. My labor force is composed of a handful of 1099 SubContracted associates; as well as my wife and myself, who receive compensation via K1 Annual Distributions. Are we eligible for PPP Program? And if so, what information am I obliged to provide to my banker? Based on our pay structure, we don’t process Form 941

  75. EIDL is great for those businesses who could get it. However the fund is so severely backlogged that they are not even taking new applications except for agricultural businesses.
    It would have been more helpful to have clarified in your article’s title that it is advice for those who were granted an EIDL.
    For small businesses that haven’t been granted a EIDL or PPP, we are trying to find info on getting financial relief, not reading through another article that isn’t relevant.
    Thank you.

    1. Marsha – I’m sorry that wasn’t clear. We were getting so many questions about this topic from people who were getting approved that we wanted to try to help them. You have seen the portal is open again for all small businesses right?

  76. Good morning,
    Do EIDL loans have any up-front costs? Any prepayment penalties? Are any parts of it forgivable?
    Thanks, Gary

  77. People who got an EIDL before a PPP prior to April 3rd had the ability to refinance the EIDL into their PPP. What about now? If I am offered an EIDL in June, can I refinance it into a PPP I received in mid-April?

  78. Absolutely, 100% the best information I have read on the EIDL and to top it off, finally an explanation on how the EDIG happens even if you do not take the loan. THANK YOU!

  79. Still doesn’t explain much about what you can use it for or what you can Not use it for. Half of it on the list is confusing. Probably yes, need CPA to help you out…