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How To Determine If Your EIDL Loan Is Forgivable

COVID stimulus programs are winding down. One of the last to end will be the Economic Injury Disaster Loan (EIDL) program, which wraps up on December 31, 2021.

    Chris Motola
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Chris Motola

Chris Motola

Expert Analyst & Reviewer at Merchant Maverick
An expert in personal and business loans and financial health, Chris Motola has been writing about small business finance and payments for over 5 years. He has been cited in various industry publications, including Forbes Advisor, GoBankingRates, and Medium. Chris is a graduate of the University of Central Florida.
Chris Motola
View Chris Motola's professional experience on LinkedIn.

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129 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    SAMANTHA ALARCON

    If my business received an EIDL loan, and I (80% ownership) needed to file bankruptcy, but the co owner (20%) doesn’t file, would the loan debt go fully to him? I would imagine he would need to file bankruptcy if he couldn’t afford it, correct?

      This comment refers to an earlier version of this post and may be outdated.

      Erica Seppala

      Hi Samantha!

      With most loans, including SBA loans, each personal guarantor has agreed to take on the entire loan balance, regardless of the actions of other owners. You can check out this article to learn more. In other words, the co-owner may likely still be liable for the full balance of the loan if you opt to file for bankruptcy. The co-owner may also choose to file for bankruptcy if he is unable to afford this and other debts. Since I am not qualified to give legal advice, I would highly recommend that you and your partner speak with an attorney for targeted advice for this specific situation. Good luck!

        This comment refers to an earlier version of this post and may be outdated.

        Dee

        Hello where do you apply for a EIDL loan forgiveness or for the grant is there a link?

        Thank you

          This comment refers to an earlier version of this post and may be outdated.

          Jessica Dinsmore

          Hi Dee,

          You’ll need to repay the loan unless you meet the specific requirements we discuss in the first section of the post Can EIDL Loans & Grants Be Forgiven?. You can review the second section in the post How To Get Forgiveness On Your EIDL Emergency Advance for an explanation on how grant forgiveness works. But in short, you shouldn’t need to do anything, as it’s automatically forgiven. Hope that helps!

            This comment refers to an earlier version of this post and may be outdated.

            Ymarchena

            I have a ppp loan and edil loan, I sold my business without notification to SBA. Can I still make a monthly payment?

              This comment refers to an earlier version of this post and may be outdated.

              Erica Seppala

              Hi there!

              If your business has received an EIDL or PPP loan, you must notify and receive approval from the SBA if you intend to sell the business. This information will all be in the loan documents that you signed. Unfortunately, I’m not qualified to give legal advice regarding your situation. However, I would recommend that you reach out directly to the SBA or seek legal counsel to find out next steps. Good luck!

                This comment refers to an earlier version of this post and may be outdated.

                Joe

                I used part of the the EIDL for payroll for the first few months of COVID. Is the Tax portion of that still due since it essentially went back to the federal and state government? (put simply, is there forgiveness for the amount used to pay taxes?)

                  This comment refers to an earlier version of this post and may be outdated.

                  Erica Seppala

                  Hi Joe!

                  Your business will still be responsible for your portion of employment taxes, even if payroll was covered by the EIDL or EIDL Advance. For specific advice, I’d recommend speaking with an accountant, who can also keep you updated on any tax deductions and credits that may be beneficial for your business. Good luck!

                    This comment refers to an earlier version of this post and may be outdated.

                    Karen

                    I received an EDIL Loan under $150,000.00 no personal signature, but there is a lien on my fixtures and inventory. I have struggled to kept the restaurant going. I can’t find employees, price of food has gone up, I have had to close one day a week because I don’t have enough employees. My head cook is leaving the end of September and I hired someone to take her place and now he has quit. I haven’t been able to find another cook and am running out of time. I will have to close without a cook. I don’t know where I stand and what to do. Any advise?

                      This comment refers to an earlier version of this post and may be outdated.

                      Erica Seppala

                      Hi Karen!

                      I’m sorry to hear about the struggles that your business has been facing. You’re certainly not alone, as restaurants across the nation are facing employee shortages, high turnover rates, and financial burdens. I’d recommend checking out our post 10 Ways To Reduce Your Restaurant Turnover Rate, which could give you some ideas as to how to bring in new employees, such as offering a hiring bonus.

                      You can also look into additional financial resources to help keep your business afloat. This includes small business grants, loans, and credit cards. Before seeking more funding, though, I would recommend taking a hard look at your finances to determine if this is the right course for your business. You can also see if there are ways to cut costs within your business (i.e., shop around for other suppliers or trim down your menu.) Whatever you decide to do, we here at Merchant Maverick wish you the best of luck!

                        This comment refers to an earlier version of this post and may be outdated.

                        PVT

                        Hello Dan,

                        My husband and own a small LLC Series company that was organized for our handful of rental properties in 2010. The rental condos are located in a low income zip code. The physical business suite is not located in a low income zip.

                        The LLC received a $20,000 EIDL loan in 2021 for loss of rent dollars. My understanding is that if the LLC business was located in a low income zip that it could qualify for $10,000 of the EIDL loan to be forgiven or basically turned into a grant. Do you agree? If this is true, could we legally change the physical business address at this point and move it to the low income zip?

                          This comment refers to an earlier version of this post and may be outdated.

                          Jessica Dinsmore

                          Hi PVT,

                          There’s not much SBA guidance explicitly addressing this, but we’ve seen property owners in this situation say they were able to get approved for a Targeted EIDL grant by showing that they owned and operated a property within a qualifying zip code. It’s probably worth applying. The worst that will happen is you’ll be rejected. Good luck!

                            This comment refers to an earlier version of this post and may be outdated.

                            Pri

                            Good article.

                              This comment refers to an earlier version of this post and may be outdated.

                              Russ mantione

                              My brother in law received an EIDL loan in April of 2020. He was the sole member of the LLC. There are no other employees. Essentially he was the business. There is about half of the proceeds of the loan in the business bank account and some office furniture. Very little receivable and negligible payables.
                              He passed away about 2 months ago. As the assets are probably insufficient to repay the demand from the SBA for repayment, is there a mechanism where the LLC can get out from under the loan at least in part. Is Chapter 7 filing the correct way to go?

                                This comment refers to an earlier version of this post and may be outdated.

                                Jessica Dinsmore

                                Hi Russ,

                                I’m so sorry for your loss… This is a bit of a tricky situation. Debt obligations may vary depending on how much was taken out, whether a personal guarantee was signed, and any available business assets that the SBA could liquidate to cover the debt.

                                When dealing with settling estates, it’s best to speak to a lawyer about available options and speak to the SBA about any possible deferments or relief.

                                I wish I had an easier route to offer you, but I do hope that the info is somewhat helpful to you. Best wishes.

                                  This comment refers to an earlier version of this post and may be outdated.

                                  BG

                                  I understand that the EIDL *loan*, which I received last year, is not forgivable. Is it possible and legal to try and qualify for a PPP loan now, and use that money to pay off the EIDL? My loan was small but my business has not recovered through COVID yet, and even with the year deferment I don’t want my interest to keep rising because I can’t afford to pay this loan off yet. I severely underestimated the impact that COVID would have on my industry.

                                    This comment refers to an earlier version of this post and may be outdated.

                                    Jessica Dinsmore

                                    Hi BG,

                                    Unfortunately as of May 5, 2021, the SBA has stopped accepting PPP applications due to lack of funds. You may however be able to tap into a small business grant or two. We have posts on a variety of small business grants, Nonprofit grants, Startup grants and how to find them, as well as tips on how to get your grant application noticed. Additionally, you may be eligible to increase your EIDL loan amount, if that is something you’d be interested in. I hope that at least one of these resources is helpful to you–and if you have any additional question please reach back out to us. Best wishes to you!

                                      This comment refers to an earlier version of this post and may be outdated.

                                      Yvonna Martin

                                      I received EIDL loan in 2020 but unfortunately I had to close my business anyway. Is there an exception to repayment if my business is now closed? Can I get any forgiveness for the loan? Or worse, am I going to be required to pay it back in full if I contact SBA with this question?

                                        This comment refers to an earlier version of this post and may be outdated.

                                        Erica Seppala

                                        Hi Yvonna!

                                        I’m sorry to hear about the closure of your business. Unfortunately, even if your business closes, you will be required to repay your EIDL. Unfortunately, if you do not pay, there are actions that the federal government will take. If you signed a personal guarantee to receive your loan, your personal assets may be seized to secure the debt. If you put collateral up for the loan, that collateral can also be seized if you default on the loan.

                                        Even if you didn’t sign a personal guarantee or pledge collateral, there are still actions the government may take, including seizing business assets or business income tax refunds. The default may also be reported on your credit, significantly lowering your score and affecting your chances of borrowing in the future. There’s a good article here that explains what happens if you default on your EIDL.

                                        You may also opt to file bankruptcy and can potentially have this loan discharged. But there are costs and drawbacks associated with bankruptcy, so it’s best to consult an attorney for more information on whether this is an option that would work for you.

                                        The good news is that EIDL payments have been deferred until 2022. While you will still have to pay back the loan, this does buy you some extra time to explore your options for repayment. Good luck!

                                          This comment refers to an earlier version of this post and may be outdated.

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