If a business that has received an Economic Injury Disaster Loan (EIDL) through the U.S. Small Business Administration (SBA) closes, the responsibility for repaying the loan typically remains with the business. Here's what generally happens:
Loan Repayment Obligation: Closing the business does not automatically absolve the business owner of their obligation to repay the EIDL loan. The business owner is still responsible for repaying the loan according to the terms outlined in the loan agreement.
Use of Collateral: If the EIDL loan was secured with collateral, such as business assets or personal guarantees, the SBA may seek to recover the outstanding loan balance by liquidating the collateral. This process would depend on the specific terms of the loan agreement and applicable state laws.
Communication with the SBA: It's crucial for business owners to communicate with the SBA if they anticipate difficulties in repaying the loan due to the closure of their business. The SBA may offer options such as loan deferment, loan modification, or repayment plans to help the borrower manage their debt.
Impact on Credit: Defaulting on an EIDL loan can have negative consequences for the borrower's credit score and financial standing. It's in the borrower's best interest to work with the SBA to find a solution that allows them to fulfill their repayment obligations.
Overall, while closing a business can complicate the repayment of an EIDL loan, it's essential for borrowers to understand their obligations and communicate with the SBA to address any challenges they may encounter.