What Can California EIDL Loans Be Used For?

California businesses have been approved for billions in California Economic Injury Disaster Loans (EIDLs) by the The Small Business Administration (SBA).

You can use the California EIDL loan you receive through the SBA’s EIDL program to cover day-to-day activities in your California business without paying high interest rates.

It is important to be aware of a few important restrictions on California EIDL before you begin spending the funds.

California Economic Injury Disaster Loans

If you have suffered substantial economic injury and are one of the following types of businesses located in a California declared disaster area, you may be eligible for a SBA EIDL:

  • California small business.
  • California small agricultural cooperative.
  • California most private nonprofit organizations.

California EIDL Loan Eligibility

  • Substantial economic injury means the California business is unable to meet its obligations and pay its ordinary and necessary operating expenses.
  • California EIDL provides the necessary working capital to help small businesses impacted by a disaster survive until normal operations resume.  
  • California EIDL assistance is available only to small businesses when SBA determines they are unable to obtain credit elsewhere.

California SBA can provide up to $2 million* to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. The loan amount will be based on your actual economic injury and your California company’s financial needs, regardless of whether the business suffered any property damage.

A California business may qualify for, both, an EIDL and a physical disaster loan.

California EIDL Loan Approval Process

California has approved 585,007 EIDL applications totaling $56,728,037,997 in SBA EIDL loans.

The U.S. Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) program is a federal small business loan program that financially supports California small businesses’ economic injury recovery from a natural disaster or from the COVID-19 disaster affecting California businesses.

Learn more about the California EIDL Loan Approval Process. You can still apply for the California ERC tax credit, even if you received an EIDL loan.

What Can California EIDL Loans Be Used For?

California EIDL loans may be used to provide working capital necessary for business operations, as well as for expenditures needed to mitigate the effects of a pandemic.

Spending and debts in this category include working capital, prior business debt (for example, mortgages and credit card debts) payroll, continuation of health care benefits, rent, maintenance, utilities, and fixed debt payments. Expanding a California business cannot be done with EIDL loans.

A loan from the California EIDL may be used to fund renovations that have already been completed, but cannot be used to expand the business or repay debt owed to a federal agency.

Borrowers may use EIDL working capital loan proceeds to make regular payments for operating expenses and to:

  • Pay or prepay California business non-federal debt incurred at any time (past or future), including monthly payments, payments of deferred interest;
  • Pay regularly scheduled payments on federal debt;
  • Payroll;
  • Rent/mortgage;
  • Utilities; and
  • Other ordinary California business expenses.

How California EIDL Can’t Be Used?

There are different ways that you clearly cannot use disaster loan proceeds and these are included under the section that includes ineligible use of proceeds:  

California EIDL proceeds may not be used for: 

  1. Payment of any dividends or bonuses; 
  2. Disbursements to California 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; 
  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;
  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.

What’s Best Practice For Tracking The Use of California EIDL Funds?

The easiest way to track how your California EIDL funds are being used is to keep them in a separate bank account. For SBA review, you can provide bank statements showing the entire transaction history related to your EIDL funds.

While you aren’t required to submit documents automatically, you should keep careful records of how you spend California EIDL proceeds in case the SBA or another governmental agency requests it in the future. In the same way that there have been audits and inspections of past disasters, some of these loans will also be scrutinized.

It is not necessary to use a certain California business account to spend money. Just keep track of all eligible expenditures that you can attribute to the EIDL. While you are in possession of the loan, if prompted by the SBA, it is up to you to self-report what business activities you used the funds for.

Conclusion and Summary

Managing your California EIDL loan properly will allow you to maximize its benefits, so you need to know what you can and cannot do with it.

Hiring an EIDL Loan Advisor in California allows small business owners to focus on what matters most when growing their companies, and without having to worry about how they’ll secure SBA loan financing when they want or need it most. In a time of great need like COVID or other natural disaster that disrupts or damages their California business.

Does Your California Business Need an Increase or Loan Modification to Your Existing SBA EIDL Loan?

Did you already receive a California SBA EIDL loan for your California business?

We can assist your business in requesting additional SBA EIDL loan funds through the increase request and loan modification process in California.

Schedule Your Free Disaster Loan Consultation to see if we may be able to help your business with the SBA Increase Request Process in California.

Was Your California SBA EIDL Loan Denied?

Has your California SBA EIDL loan been denied for your CA business?

We can assist you in filing for an SBA EIDL loan reconsideration appeal for your business in California. Schedule Your Free Disaster Loan Consultation to see if we may be able to help your business with the SBA Loan Reconsideration Process in California.

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