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What Happens to SBA EIDL Loan if Business Closes?

Many small businesses have relied on the U.S. Small Business Administration’s (SBA) Economic Injury Disaster Loans (EIDL) to help them weather the financial impact of the COVID-19 pandemic. But what happens to your EIDL loan if you have to close your business?

The good news is that the SBA has several programs in place to help borrowers who are unable to repay their EIDL loans due to circumstances beyond their control, including business closures. In this article, we’ll discuss the different options available to you and how to apply for them.

EIDL Loan Forgiveness

The SBA has a loan forgiveness program for EIDL loans that were used for certain eligible expenses, such as payroll costs and rent. To be eligible for loan forgiveness, you must have used the funds for authorized purposes and have met the following criteria:

• Your business was impacted by COVID-19 and was forced to close or reduce operations.
• Your business was unable to obtain financing from other sources.
• Your business has been in operation for at least one year.

If you meet these criteria, you can apply for loan forgiveness by completing the SBA’s Loan Forgiveness Application and submitting it to your lender. The SBA will then review your application and make a decision on whether to forgive your loan.

EIDL Loan Deferment

If you are unable to repay your EIDL loan on time, you may be able to request a deferment. A deferment allows you to postpone your loan payments for a period of time, typically up to 12 months. To request a deferment, you must contact your lender and explain your financial situation.

The lender will then review your request and make a decision on whether to grant the deferment. If your request is approved, you will not have to make any payments on your loan during the deferment period.

EIDL Loan Modification

If you are unable to repay your EIDL loan due to a permanent hardship, such as a business closure, you may be able to request a loan modification. A loan modification can change the terms of your loan, such as the interest rate, the repayment period, or the amount of your monthly payments.

To request a loan modification, you must contact your lender and explain your financial situation. The lender will then review your request and make a decision on whether to approve the modification.

Conclusion

If you are unable to repay your EIDL loan devido to circumstances beyond your control, there are several options available to you. You may be eligible for loan forgiveness, a deferment, or a loan modification. To learn more about these programs and how to apply for them, please contact your lender.

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