The COVID-19 pandemic left many businesses counting losses in the country. Some were left with no choice but to shut their doors, while others were still struggling to keep themselves afloat. But the federal government has made concerted efforts to support such businesses across the country. This is where EIDL loans come in.
You may ask, what is an EIDL loan? The federal government started this loan program through the Small Business Administration (SBA) to help businesses affected by the COVID-19 pandemic. While some businesses have been able to reopen, some are still struggling and counting losses brought by the pandemic. The good news is that the federal government has helped many small businesses recover from losses and get back on their feet. But according to Lantern by SoFi, most businesses are not taking full advantage of the EIDL loans.
Below are 5 mistakes people make when using EIDL loans:
Failure to access Small Business Administration programs
Most businesses in the country are facing unprecedented economic challenges thanks to the COVID-19 outbreak. However, many businesses are also taking advantage of the programs being offered by the federal government. From the time the pandemic broke out, the federal government has initiated several programs means to caution small businesses from the effects of the pandemic.
As of June 15, 2020, the SBA started accepting new economic Injury disaster Loan applications from small businesses that qualify. Although going through all the SBA programs is time-consuming, it is a worthy effort that small business owners need not ignore.
Hiding from the Internal Revenue Service (IRS)
This is another big mistake that people make when using EIDL loans. As the old adage goes, nothing is certain except death and taxes. There’s no point trying to hide from the taxman because they will eventually come knocking at your door. IRS officials are constantly looking for small businesses with tax debts. If your business is behind in terms of tax payments, the best thing is to communicate with IRS and work out a plan on how to settle them.
No dialogue with commercial landlord
Some small business owners tend to ignore their landlords instead of facing them and negotiating the terms. But if the revenue from the business is significantly low, you will need to sit down and negotiate with your landlord on the previous terms. With huge numbers of unemployment claims and loan defaults, landlords are open to negotiations with their tenants.
Using EIDL loans for purposes other than intended
It is always tempting to divert cash obtained from the loan for purposes not initially intended. Although it may appear harmless at the beginning, you might end up using a chunk of the money for non-business-related issues. This can cause you problems with the federal government in case you default on the loan.
Failure to consolidate debt at lower interest rates
Cash flow has been a major problem for many small businesses, particularly during the pandemic. You might be faced with unexpected expenses that leave you with no option but to seek a loan.
In general, EIDL loans have helped many businesses during the pandemic. But it is important to avoid the common mistakes that many people make.