Managing Your EIDL Loan

At the start of the COVID-19 pandemic in spring 2020 and until 2022, businesses throughout South Florida were struggling immensely with business costs as a result of “lockdowns,” stay-home orders, and clients and customers in general being hesitant about being out in public and exposing themselves to virus risks. Recognizing that smaller businesses were struggling because of the consequences of the pandemic, the federal government provided various options for business funding in the form of what ended up functioning like grants, as well as loans. One type of loan that was approved with frequency for small businesses in the West Palm Beach area was a loan through the Economic Injury Disaster Loan (EIDL) program.

The amounts of EIDL loans vary widely. Some businesses borrowed less than $25,000, while others borrowed more than $500,000. For loans greater than $25,000, collateral was required. For loans greater than $200,000, a personal guaranty was required. All of the EIDL loans have a fixed interest rate of 3.75 percent and a loan term of 30 years. While smaller loans may be more manageable on these terms, EIDL loans of larger amounts are resulting in businesses struggling financially in South Florida. How can you manage your EIDL loan and potentially seek debt relief? Consider the following possibilities.

Business Loan for Debt Consolidation 

If your business is also struggling to repay other loans with higher interest rates and shorter loan terms, it may be possible for your business to consider debt consolidation with a new business loan and favorable terms that could allow you to pay off the EIDL loan and other debts, and to have a more manageable payment to the creditor.

Business loans for debt consolidation may allow you to lengthen the loan term for lower payments, and to take advantage of certain deferment options at particular periods of time.

Offer in Compromise 

If your business is already past-due on your EIDL loan but your business has not filed for bankruptcy, you may be able to consider an offer in compromise (OIC). An OIC is an offer your business makes to the Small Business Administration (SBA) to pay an amount in a lump sum that is less than what your business owes on the loan.

Chapter 11 Bankruptcy 

For businesses that are struggling with EIDL loans and other forms of debt, filing for Chapter 11 bankruptcy can allow for debt restructuring that can make it possible for the business to get caught up on loans with existing creditors and having some debts discharged. All of this can happen while your business remains open. You do not need to close or sell your business when you file for Chapter 11 bankruptcy.

Contact Our West Palm Beach Business Law Attorneys for Assistance 

For businesses in West Palm Beach and throughout South Florida, EIDL loans are now due. For the nearly 500,000 loans in the state totaling nearly $37.5 billion, thousands of business recipients are struggling to repay those loans while also keeping their businesses afloat. If you are having difficulty meeting the repayment requirements of your EIDL loan, you may have options that do not necessarily involve closing your business. One of the experienced West Palm Beach business lawyers at  Kelley, Fulton, Kaplan & Eller can speak with you today to discuss the details of your business finances and your EIDL loan, and we can tell you more about options that may be relevant to you for managing EIDL loan debt.

Sources:

sba.gov/sites/default/files/2022-04/COVID-19%20EIDL%20TA%20STA_04282022_Public-508.pdf

sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan/about-covid-19-eidl