As an expert business broker, I am here to answer the question “What happens to SBA EIDL Loan if Business Closes?”. This is an important question, as SBA loans can be a great way to fund a business, but understanding the risks, especially if the business should close, is extremely important.

What happens to SBA EIDL Loan if Business Closes?

If your business is closing, and it has taken an EIDL greater than $200,000, the business owner’s personal assets and finances are at extreme risk. In this case, the owner’s personal assets such as real estate and vehicles could be seized to satisfy the loan payment. The EIDL is a non-dischargeable loan, meaning it cannot be removed from the business owner’s personal financial record if the loan is not repaid. The loan is secured by the assets of the business. So if you fail to repay your loan, the SBA can take possession of the assets of your business.

If the small business misused its SBA PPP Loan funds and then closed permanently, the SBA and Treasury have indicated their intent to follow the money by attempting to collect the loan funds. So, in the event a borrower can’t repay the loan and defaults, the lender generally wouldn’t be able to seize business or personal assets. The SBA has yet to provide small business debtors and their advisors with comprehensive guidance on how PPP loan and Coronavirus-related EIDL debt should be handled if the borrower does not repay.

It is important for small business owners to understand the risks associated with taking an EIDL loan in the event of a business closure. Business owners should work closely with a business broker or other financial advisor to ensure they understand the potential consequences of taking on such a loan. Additionally, business owners should always ensure they are following SBA guidelines and regulations.

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Do you need to reimburse the Eidl if your business closes down?

If your business is closed by Nov 29, 2022 and you owe more than $200,000, you could still be held responsible for repayment. Therefore, you should have a plan in place in case your business is no longer running.

Does the Small Business Administration ever cancel EIDL loans?

Unlike the Paycheck Protection Program (PPP) loans, Economic Injury Disaster Loans (EIDL) are not forgiven and businesses have to repay them. The Small Business Administration granted businesses a deferment of payments for up to two-and-a-half years, so this year, the time has come to start paying them back.

What would happen if my business fails and I cannot repay my loan from the Small Business Administration?

If a business fails, what is the outcome of the SBA loan?

The SBA will reimburse the lender for the part of the loan that was guaranteed, and then they will reach out to you to arrange a repayment plan with them.