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COVID Relief: How You Can (& Can’t) Use Your Economic Injury Disaster Loan & Advance

    Erica Seppala
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Erica Seppala

Erica Seppala

Expert Analyst & Reviewer at Merchant Maverick
An expert in accounting, finance, and point of sale, Erica has been researching and writing about all things small-business since 2018. Erica's insights into personal and business finance have been cited in numerous publications, including MSN, Real Simple, and Reader's Digest. She is a graduate of Limestone College.
Erica Seppala
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    When working out of your own home, how do you calculate expenses for mortgage payment and utilities that can be paid for by the EIDL funds? Are they a certain percentage of the bills? Also my pay checks vary by sales. Should I average them over a period of time to allow myself to take a bi-weekly pay? TIA!

      Erica Seppala

      Hi Jody!

      Typically, we calculate home office expenses by finding the percentage of the home and utilities that are being used for business purposes. This is what is done when calculating home office deductions on our income tax return. Unfortunately, the SBA hasn’t released any guidance as to how these expenses should be calculated for EIDL. I would recommend reaching out to the SBA directly to find out more for your specific situation.

      As far as how you should pay yourself, look no further than Line 31 of your Schedule C. Divide this number by 52 to determine your average weekly profit and can be used to guide how much you pay yourself. If you plan to pay yourself bi-weekly, multiply this number by 2. For example, if the annual profits on line 31 are $52,000, dividing this number by 52 would show that your average weekly profits were $1,000. If you’re paying yourself every two weeks, you would pay yourself $2,000 per pay period. Hope this helps!


        Can you purchase a fixed asset with existing funds, for instance down payment, and the use EIDL loan proceeds to make installments.

          Erica Seppala

          Hi William!

          The purpose of the EIDL is to help small businesses “meet financial obligations and operating expenses that could have been met had the disaster not occurred.” Funds can’t be used for purchasing fixed assets, expansion, or to replace lost sales or profits. Based on the available guidance from the SBA, I am inclined to say that purchasing a fixed asset with your own funds and then immediately using EIDL funds to make payments on that asset is not permissible. However, you can always reach out directly to the SBA for further guidance on your specific situation. Good luck!


            If I’m correct in saying EIDL loans can be used for equipment repairs, then what about replacements? For example, a desk chair is damaged beyond repair but is necessary for my business. Would a replacement chair be allowed? Or for another example, say the engine in my supply truck goes and the cost to replace the engine is more then the value of the truck itself. Can I replace the truck with a comparable one? Essentially, can an existing capital asset be replaced using an EIDL loan with a comparable item if it is determined that it can’t be repaired?

              Erica Seppala

              Hi Bill!

              Unfortunately, EIDL funds can’t be used for repair costs. EIDL funds also can’t be used to purchase fixed assets, whether it’s something you need to expand your business or just a replacement like the examples you gave in your comment. EIDL funds can be used for day-to-day operating expenses. Another source of funding would need to be used for repairs and replacement of equipment. Good luck!

                Christina Jackson

                Can the eidl advance be used to purchase a camera? I will be taking pictures of inventory and its an ongoing expense to me because I will have inventory in monthly.

                  Erica Seppala

                  Hi Christina!

                  Unfortunately, a camera would be considered an asset that wouldn’t be covered under the EIDL Advance. These funds are to be used for normal operating expenses that would have normally been met had the pandemic not occurred. If you’ve used a portion of your advance to pay yourself a salary, you can certainly use the funds you pay yourself for any purchases not covered under SBA rules. Good luck!


                    DO you have to prove how you used the advance, or just with the loan? Just want to be sure my files are in order should anyone come asking.

                      Erica Seppala

                      Hi EB!

                      As of right now, there isn’t anything in place that says you have to prove to the SBA how you used the advance. However, in the event that you face an IRS audit, it’s always good to have all your records in order, including those related to your EIDL loan or advance. This could be as simple as just hanging onto your receipts, using good accounting software to account for purchases, or having bank statements on hand that show your deposits and purchases.

                        Alan Clark

                        Can you pay off a business vehicle loan you had before the advance?

                          Erica Seppala

                          Hi Alan,

                          Fixed debt payments can be paid using your EIDL or EIDL Advance funds. This includes loan payments for vehicles that are used exclusively for business.

                            Donna Lambert

                            Hi, I have a hair salon and pre-COVID , there were 5 stylists working there. Since we have returned to work, we only have 2 which greatly affects my monthly income. I can’t find anyone to work there as we share spaces/ rooms. Clients do not want to be in a room with other’s. It’s been 15 months and no luck. I was applying for an edil in order to be able to afford separating work spaces so I can fill those stations. Can I use the eidl in this manner?

                              Erica Seppala

                              Hi Donna!

                              Unfortunately, the EIDL can be used to cover normal operating expenses and financial obligations that would have been met if not for the pandemic. This includes things like payroll or rent. Things like renovations or business expansion would not be covered expenses. However, one option to consider is an SBA 7(a) loan, which has more flexibility and would allow you to separate workspaces or make other renovations to your salon. You would have to meet all requirements, including credit requirements, to qualify, but it’s something certainly worth looking into. Good luck!


                                Can you purchase a computer and small office equipment with an eidl advance? My laptop i use for my biz is 10 years old…

                                  Erica Seppala

                                  Hi Laurie!

                                  Per the SBA’s rules for EIDL loans and advances, fixed assets and equipment are not covered expenses. EIDL funds should be used for day-to-day operating expenses. For example, funds could be used to cover payroll expenses, utilities, or office supplies.

                                  If you’re unsure of a purchase that you believe is part of your daily operating expenses, you can contact the SBA directly to learn if these purchases are eligible expenses. Good luck!

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