Selling a Business with an EIDL Loan
Did your business borrow money through the COVID-19 Economic Injury Disaster Loan (EIDL) program? If so, your business certainly is not alone. According to data from the US Small Business Administration (SBA), by the time the COVID-19 EIDL loan program closed in 2022, more than $378 billion in loan dollars had been approved, and nearly 4 million businesses had received loans. In Florida alone, nearly 500,000 businesses were approved for EIDL loans — one of the states with the highest numbers of approved EIDL loans in the country — totaling more than $37 billion.
Now that those loans are due, with 30-year loan terms, businesses throughout South Florida are working to figure out if they can actually repay what they owe. While the interest rates are low, many businesses are nonetheless struggling to make EIDL loan repayment work financially for their businesses. If your business is in this situation, you may be thinking about selling the business and wondering: is it possible to sell a business with an EIDL loan?
Your Business Will Owe the EIDL Loan for Years to Come
If you are considering the possibility of selling your business and your business has an EIDL loan, the loan terms likely mean that your business still owes nearly 30 years of payments on the loan (the initial 30-year term, minus whatever payments have been made to date).
You will need to disclose the loan information to any potential buyer, and you may also need to obtain approval from the SBA in order to sell the business with the EIDL loan.
Terms and Conditions of the EIDL Loan Pertaining to the Sale of Your Business
It is also important to know that there are likely terms and conditions associated with your EIDL loan that pertain directly to the sale of the business. For most business owners in Florida who applied for and received EIDL loans, part of the terms of their promissory note may have included a “due on sale” clause. In addition, the SBA may have a lien on business assets, especially for loans over $25,000.
For loans with a personal guarantee, it will also be important to discuss whether a personal guarantee can impact the sale of the business or your obligations to the SBA. All of these issues should be discussed in detail with a West Palm Beach business law attorney who has experience handling EIDL loan matters.
Contact Our West Palm Beach Business Attorney Today
Businesses throughout South Florida borrowed money and received funding from the federal government during the COVID-19 pandemic. While some of that funding effectively functioned as grant money and did not need to be repaid, EIDL loans are due for businesses throughout the West Palm Beach area. Now that hardship applications for EIDL loan repayment have closed, many businesses are experiencing difficulty determining how to move forward with EIDL loans. Whether you have questions about selling your business when you have a lengthy EIDL loan, or you want to pursue other potential EIDL debt relief options, an experienced West Palm Beach business lawyer at Kelley, Fulton, Kaplan & Eller can speak with you today. Contact us for more information about how we can assist your business.
Sources:
sba.gov/funding-programs/loans/covid-19-relief-options/eidl
sba.gov/sites/default/files/2022-04/COVID-19%20EIDL%20TA%20STA_04282022_Public-508.pdf
