How to keep track of your EIDL spending

Business credit cards have robust record keeping features that can help you document how you've used your loan funds


For many business owners, Economic Injury Disaster Loans have been a lifeline in tough times. However, if you received one, it is essential to use it properly. Here’s how to keep track of your spending.

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When the coronavirus crisis first hit, many small business owners rushed to apply for Economic Injury Disaster Loans.

These long-term loans are meant to cover financial obligations and operating expenses that “could have been met had the disaster not occurred.” As of mid-September, there were 3,589,667 loans worth $190.4 billion approved.

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How do Economic Injury Disaster Loans work?

For many business owners, the terms of these 30-year loans were very attractive. They offer 3.75% interest, with no prepayment fees or penalties. Payments can be deferred for one year unless borrowers want to make payments right away. Borrowers need to put up collateral for loans above $25,000 and give a personal guarantee for those above $200,000.

In case you didn’t apply yet and need funds, EIDLs for businesses hurt by the pandemic were still available at the time of this writing.

Many business owners applied for an EIDL advance. The advances were for $1,000 per employee, up to a maximum of $10,000. Funds ran out for this program. Businesses that received one of these advances don’t have to pay it back.

However, if the business also got a forgivable Paycheck Protection Program loan, the EIDL advance will be subtracted from the forgivable amount.

For many business owners, EIDLs have been a lifeline in tough times. However, if you received one, it is essential to use it properly.

See related: How to get part of your SBA loan forgiven under the CARES Act

How can you use your EIDL funds?

According to the SBA’s website, “EIDL proceeds can be used to cover a wide array of working capital and normal operating expenses, such as the continuation of health care benefits, rent, utilities and fixed debt payments.”

Generally speaking, operating expenses are those that a business normally incurs during day-to-day business operations. These usually include rent, equipment, inventory costs, marketing, payroll and research and development.

If you have been approved for an EIDL, you must retain receipts and contracts for all loan funds spent for three years, according to the SBA.

How credit cards can help you keep track of spending

Putting all of the business expenses for which you use the loan on a business credit card can help on this front. Keeping good records is essential in the event you need to demonstrate to lenders that you used your EIDL properly.

If you will have many business expenses that don’t fall under the standard definition of operating expenses, you may wish to maintain two separate business credit cards.

Use one for the expenses that are eligible under the EIDL loan program and the other for ineligible expenses. This will make it even easier to keep track of how you are spending the loan.

One of the advantages of using a business credit card is that many offer more robust reports on your spending than personal credit cards do. This will not only help you keep track of how you’re using your EIDL loan but will also assist you at tax time.

See related: Use credit cards to boost cash flow at your business

Bottom line

Whenever you borrow money for your business, it’s always important to track how you’re spending it. Doing so daily will prevent a mad scramble if you ever need to account for how you used the money in the future.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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