For some business owners, the EIDL loan their business took out during Covid has come due, and they are unable to repay the loan.
EIDL stands for Economic Injury Disaster Loan, which is a type of loan offered by the Small Business Administration (SBA) to provide economic relief to small businesses, non-profit organizations, and agricultural businesses that have suffered substantial economic injury as a result of a disaster.
The EIDL program was initially designed to help businesses recover from physical disasters such as hurricanes or floods but was expanded to include economic disasters such as the COVID-19 pandemic.
EIDL loans offer a low-interest rate, long-term repayment options, and can be used to pay for various expenses such as payroll, accounts payable, and other operating expenses that cannot be met due to the impact of the disaster. The loan amount can be up to $2 million, and the terms of the loan depend on the applicant’s financial situation and ability to repay.
If your business is unable to repay an Economic Injury Disaster Loan (EIDL), there are a few options available to you.
Aside from the financial liability your business has to repay the loan, depending on the size of the loan, the SBA may have a collateral interest in your business equipment or inventory, or you may have signed a personal guarantee where the business owner(s) have personally guaranteed to repay the loan. It is important to review your loan agreement with the SBA to confirm what type of liability you and/or your business may have to repay the loan.
Firstly, it’s important to contact the Small Business Administration (SBA), which is the organization that provides EIDLs, and explain your situation. They may be able to work out a repayment plan that fits your financial circumstances, such as extending the repayment term or adjusting the interest rate.
If your business is facing severe financial hardship, you may be able to request a loan modification or a deferment of payments. The SBA may also offer loan forgiveness in certain circumstances, such as if your business was affected by a natural disaster or other qualifying event.
It’s important to keep in mind that defaulting on an EIDL can have serious consequences, including damage to your credit score and potential legal action. It’s always best to communicate with the SBA as soon as possible to discuss your options and avoid defaulting on your loan.
If your business has an EIDL loan and you’re getting behind on those payments or fear that you may get behind on them soon, you can visit us online at: www.dallawfirm.com or call/text us at (206) 408-8158.
19803 1st Avenue S.
Normandy Park, WA 98148
T (206) 408-8158
F (206) 374-2810