The EIDL Handbook for Business Owners

Bench Guides

The EIDL Handbook for Business Owners

EIDL Handbook For Business Owners

The Economic Injury Disaster Loan (EIDL) contains some of the best loan terms you'll find.

But once you've been approved, there's a lot of fine print to keep track of. What can you spend the funds on? How do you track what you've spent the money on?

Consider this your definitive guide to EIDL once you've been approved.

Guide to EIDL

Part One: The rules of the EIDL

We'll outline the conditions of the EIDL and what you can and cannot spend the funds on. We'll also walk through the bookkeeping and recordkeeping requirements for good EIDL financial hygiene.

Part Two: How to best use your funds

We'll identify important areas a small business can invest in to build a rocksolid financial and strategic foundation.

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EIDL Handbook For Business Owners

Part one: The rules of the EIDL

Haven't applied for EIDL yet?

The EIDL is to be used as working capital. Working capital refers to funds you use to cover dayto-day operations. That may seem broad and vague, but it's meant to be a versatile loan, where you can choose to spend the funds however you wish.

Haven't applied for EIDL yet? You can apply online through the SBA portal.



Example: A restaurant's day-to-day expenses would include their food ingredients and worker payrolls. It would not include patio expansion or new signage.

Allowed expenses

Any of your day-to-day normal operating expenses can be drawn on these funds. Some example expenses include:

? web hosting ? inventory ? office supplies ? accounts payable ? payroll ? rent and utilities ? merchant fees ? bookkeeping and accounting services

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EIDL Handbook For Business Owners

Prohibited expenses

Instead of listing everything you can use EIDL funds on, it might be easier to know what you cannot use EIDL funds for. These restrictions are adapted from the SBA's Standard Operating Procedures (SOP 50 30 9).

You cannot use EIDL funds for:

? Dividends and bonuses of any type ? Disbursements to owners, except when directly related to performance of

services

? This includes payments to partners, officers, directors, or stockholders.

? Repayment of stockholder / principal loans

? An exemption is allowed if the funds were added into the company on an interim basis as a result of the disaster, and non-repayment of the loan would cause an undue hardship on the stockholder

? Expansion of facilities or acquisition of fixed assets

? This includes equipment purchases such as a new video camera

? Repair or replacement of physical damages ? Refinancing long term debt

? Prohibited examples include refinancing credit card debt or a mortgage

? Paying down or paying off other loans provided by the SBA or another Federal agency

? Any repayment, even a regular installment payment, is not allowed

? Payment of any part of a direct Federal debt except IRS obligations ? Relocation ? Penalties due to noncompliance with a law, regulation, or order from any

government agency ? Contractor malfeasance

? Additional expenses due to contractor fraud is not covered by EIDL funds

A common question we receive is whether credit card payments are allowed. If you charge your day-to-day purchases to a credit card, it is acceptable to pay the monthly credit card balance with EIDL funds. You may also make monthly payments on outstanding loans (both the interest and principal are acceptable). You just cannot use EIDL funds to pay off any existing debts from before the pandemic.

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EIDL Handbook For Business Owners

Using EIDL with the PPP

You cannot use EIDL funds for the same expenses as PPP funds. For example, if you used PPP funds for July payroll, you should either wait until your PPP funds are exhausted before using EIDL funds for payroll, or just use EIDL funds on other working capital expenses. If an EIDL loan financed between January 31 and April 3 is used for payroll costs, it will be refinanced into your PPP loan if you apply for one.

We recommend trying to spend your PPP funds first, because eligible PPP expenses must be incurred over your 24-week PPP loan period to be forgiven.

Further reading: EIDL vs. PPP (A Breakdown)

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Recordkeeping and bookkeeping for the EIDL

There are a number of conditions that come with your EIDL. We want to highlight two conditions in particular:

Tracking receipts

You're required to collect and itemize all receipts and contracts for expenses paid with EIDL funds, and keep them for at least three years. Receipts refer to paid receipts, invoices, or cancelled checks.

Bench clients, you can forward copies of your receipts to your designated Bench email address. Your bookkeeper will file and store them properly for you.

Financial recordkeeping

The SBA requires that you keep financial records spanning the most recent five years, and up until three years after your loan is paid off. These records include your financial and operating statements, your tax returns, and records of distributions and dividends.

This means you'll need to have the last five years of bookkeeping completed, and you'll need to keep your bookkeeping up-to-date, right up until three years after your loan is paid off.

Further reading: EIDL Recordkeeping Rules



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