Selling a business can be complicated. One of the many questions that comes up is “what happens to EIDL loan if business closes?”. In this article, we will provide an answer to this question, as well as advice on what to do in this situation.

What Happens to EIDL Loan if Business Closes?

If your business is closing and you have taken out an Economic Injury Disaster Loan (EIDL) of more than $200,000, your personal assets and finances are at risk. If you have outstanding debt on an EIDL loan of less than $25,000, it may be uncollectible. In either case, the EIDL is a non-dischargeable debt, meaning that you are personally liable to repay it, even if your business has closed.

If you are unable to repay the loan and default, the lender generally won’t be able to seize business or personal assets. However, the lender can still take legal action against you, including wage garnishment or tax refund offset.

What To Do If Your Business Is Closing

If your small business is heading for closure despite receiving SBA PPP and/or SBA EIDL loans, it’s important to seek the advice of a lawyer to assist you with a potential debt restructuring or settlement. A lawyer can also help you explore other options such as debt consolidation or chapter 11 bankruptcy.


If you’re closing your business and have taken out an EIDL loan, you may be personally liable for the debt. Depending on the size of the loan and other factors, the lender may be able to take legal action against you. It is important to seek the advice of a lawyer to help you explore all your options.

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If a business closes down, what happens to the EIDL loan?

If you have ceased your business operations and owe less than $25,000 on an EIDL loan, the Small Business Administration has limited ability to recoup what you owe.

Is it possible for EIDL loans to be forgiven in the future?

COVID EIDL loans must be repaid in full, but repayment can be delayed for 30 months from the loan date of 2020, 2021, and 2022. This is an extension of the 12-month deferral period that was already in place.

Is it possible to have an EIDL loan forgiven?

EIDL loans cannot be forgiven, but they do have a deferment period of up to 30 months from the date of the note for loans approved in 2020, 2021, and 2022. Full or partial payments can be made at any time during this period, but are not obligatory.

What is the consequence for an SBA loan if the business does not succeed?

The SBA will recompense the lender for the part of the loan that they have secured and then get in touch with you to arrange a strategy for settling what you owe to them directly.