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Attorney Explains: Can You Invest Your EIDL Funds?


So, you’ve got a bunch of EIDL money sitting in a bank account, doing nothing but costing you 3.75% interest while you wait for qualifying expenses to come along so you can use that money.  Wouldn’t it be nice if you could invest some of that money in say Tesla stock?  As of the time of this writing, it is up over 480% year-to-date in 2020!

Or, how about just putting it into an index fund that tracks the S&P 500?  Despite the catastrophic downturn earlier in the year, the S&P is up over 7.5% year-to-date as of the time of this writing.

Or, heck, maybe you want to follow Graham Stephan’s recommendation and put your money in a high-yield savings account with Yotta Bank?

These all sound like good ideas.  But, just as anything with the SBA, the question is: is it legal?  Can you invest your EIDL money?

Okay, so, as I’m sure you know by now, the SBA places a lot of restrictions on how you can use your EIDL funds. I’ve done at least three videos before talking about this topic.

But, one question that has continued to come up that I haven’t directly addressed before is whether a borrower can temporarily invest the EIDL money in something that will earn them a positive interest return.

As usual, public SBA guidance on this point is, well, non-existent. The SBA guidance says that you cannot purchase any “fixed assets” with your EIDL funds, which includes investment real estate. But, it doesn’t say anything about investing in the stock market or putting the money in an interest-bearing account.

So, I did what any inquisitive attorney would do and e-mailed the SBA’s disaster customer service. In my e-mail, I asked the SBA if a borrower can put their EIDL funds in one or more of the following accounts:

1. An interest-bearing savings account?
2. A money market account?
3. A brokerage account (i.e. where the funds would be invested in a mutual fund or individual stocks or bonds)?

Honestly, I did not expect to get an answer. And I definitely did not expect to get an answer the same day!  But, sure enough, a few hours after I sent my e-mail, I saw a reply e-mail from the SBA in my in-box.  Can you guess what the answer was?

That’s right.  The answer was “no.”  More precisely, the answer was “EIDL funds cannot be deposited into interest bearing accounts.”  That means, “no” to a brokerage account.  “No” to a money market account.  “No” to a savings account.  And, technically-speaking, it is even a “no” to an interest-bearing checking account as well.

If you are a borrower, I know that you may have hoped for a different answer.  But, considering the other restrictions the SBA has placed on these funds, are you really that surprised?

The purpose of the EIDL program was to help businesses struggling to pay their expenses as a result of the coronavirus pandemic. It was not intended to subsidize business owners’ stock market investments.

The silver lining here is that you can still use these funds toward your business “operating expenses” as they come up. Since you won’t have to use your personal funds for operating expenses, you can hopefully set them aside and use them for investment purposes.

I know that putting a few hundred dollars into the stock market every so often is probably not as exciting as sticking $100,000 of your EIDL funds into Tesla stock and hoping to double it in the next three months. But, honestly, that’s probably a good thing.

Let dollar-cost averaging work in your favor. Contributing smaller amounts consistently over time has proven to be much more profitable over the long term. And the best thing is, you won’t put yourself at risk of losing most of your EIDL funds in a market downturn and then having the SBA come after you for an additional 50% penalty on top it for improperly using the funds!

On a side note, if you are planning to invest in the stock market using your personal funds, I would highly recommend using a commission-free platform like Webull.

I have been using Webull for my personal investments and I think it is a very good platform.

As I said, it’s commission free, their mobile app is very easy to use, and there are no minimums. You can invest in individual stocks, mutual funds, ETF’s, options, you name it.

If you sign up using my link in the description below and you deposit $100, Webull will automatically deposit 2 free stocks into your account each valued between $8 and $1,600. So, at minimum, you would get $16 just for signing up.

Full disclosure, I am affiliated with Webull. So, if you do sign up using my link, I will get a small referral fee at no extra cost to you. If you enjoy the content that I provide on this blog and on my YouTube channel and you are interested in investing in the stock market, signing up for Webull is a great way to show your appreciation for all the hard work that goes into bringing you valuable content.

In any case, I appreciate you checking out this post and the YouTube video linked above.  See you soon!

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