This article will answer the question “What happens to an SBA loan if a business closes down?” Here we will discuss the different scenarios that may arise and how to best deal with them.

What happens to an SBA loan if a business closes down?

In the event that a business closes down, what happens to its SBA loans depends on the type of loan. With the SBA 7(a) loan, the owner’s personal assets such as real estate and vehicles could be seized to satisfy the loan payment. The Economic Injury Disaster Loan (EIDL) is a non-collateralized loan, so the lender generally wouldn’t be able to seize business or personal assets. The lender will be able to take legal action to recover the money that is owed via wage garnishment, a lien on your property, and more.

What Are the Different Types of SBA Loans?

There are two main types of SBA loans: 7(a) loan and EIDL. If the loan is over $25,000 but under $200,000, then there will be collateral that the government has a lien on. In most cases, the SBA would require personal guaranties from the owners of the business. So if you fail to repay your loan, the SBA can take possession of the assets of your business.

What if the Assets Don’t Equal the Loan Amount?

If the assets of the business don’t equal the amount of the loan, then the SBA may pursue other methods to recoup their money. One of these methods is an Offer In Compromise (OIC). The OIC process typically applies to SBA loans over $25,000 and is the SBA’s way of settling the debt for less than what is owed. The offer is based on the borrower’s ability to pay. EIDL loans are not forgivable and will be repaid over a 30-year term.

No matter what type of SBA loan you have taken out, it is important to stay on top of payments and be sure to monitor the loan closely. If you find that you are unable to make payments, the SBA has an assistance program that may help. It is best to contact the SBA as soon as possible to get the best assistance.

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What would happen if I were to lose my business and am unable to repay my SBA loan?

Are you responsible for paying back an SBA loan?

If you took out an SBA loan, most likely you agreed to a personal guarantee. This means that even though the loan was taken out in the name of your business, you are still held accountable if the loan is not paid back.

What are the consequences if a company shuts down after getting an EIDL loan?

If you have a loan of less than $25,000 from the EIDL program that you are unable to pay after closing your business, the SBA will probably not be able to recover the debt. Bankruptcy is not necessarily required, although it is recommended that you consult with a lawyer.

Are SBA loans eligible for forgiveness?

A borrower can submit a request for forgiveness after all the money borrowed has been used, and this can be done before the loan’s expiration date.