Since the inception of the Small Business Administration's Economic Injury Disaster Loan (EIDL) program, small businesses and nonprofits have received more than $390 billion in assistance.
This helped them keep their doors open and workforce employed during the pandemic. These loans covered things like health care costs, operating expenses, rent, utilities, fixed debt (e.g., mortgage), and other working capital needs.
This article should clarify that confusion by answering the most commonly asked deferment questions. By the end, you'll know how to manage your payments and make a payment even while your loan is deferred. And we'll cover whether your loans can be forgiven.
Yes, you can defer EIDL loan payments for 30 months from the loan's disbursement date (i.e., when you got your first payment). You can find your disbursement data on the top of your original note's first page. You can also log in to the SBA portal at caweb.SBA.gov to see when your first payment is due.
Loans deferred in the spring of 2020 have reached the end of deferment. At this time, loans cannot be deferred any further.
Here's a quick snapshot of when your loan would be due based on when you got your first payment:
When First EIDL Loan Payment Is Due
How to Check If Your EIDL Loan Has Been Deferred
You can check to see if your loan has been deferred by logging into your account with the Capital Access Financial System (CAFS) on the Small Business Administration website. Go to caweb.SBA.gov to log into your account or enroll in an online account.
You should find information about your next payment due date on your home page under the section "payment info." If your loans have been deferred, your next payment date will be in 2023 or later.
Pro Tip: Be sure to log into your account at least once per month. If you don't, your account becomes inactive, and you'll need to contact the SBA by phone to unlock your account.
If you have questions about your deferment period, you can contact Disaster Customer Service by calling (833) 853-5638 or emailing DisasterCustomerService@SBA.gov.
Should You Make Payments while Your Loan is Deferred?
Due to the long-lasting impacts of the Coronavirus, the government worked a deferment period into the terms of the Economic Injury Disaster Loans. But that doesn't mean you can't make payments during that time. We recommend making payments during the 30-month deferment period for two reasons:
- You still pay interest on your loan amounts, and those interest payments increase as the balance on your loan increases.
- Interest is compounded daily, which makes the cost of deferral even more expensive.
Businesses that borrowed large amounts can easily double their loan balance during the extended deferment period. Making payments toward your loan will lower the overall cost of your loan significantly.
How to Make an EIDL payment
You can make payment online or by mail. To make a payment online, log into your CAFS Account and choose "Make a Payment." You can make a one-time payment or set up recurring payments (recommended).
To set up recurring payments, create an account with Pay.gov and fill out the 1201 Borrower Payment form. You'll need to provide your bank account information, including the account and routing number.
To make a payment through the mail, you'll need to send a check to the U.S. Small Business Administration, P.O. Box 3918, Portland, OR 97208-3918. Make sure your check is payable to the U.S. Small Business Administration, and include your SBA loan number in the memo section of your check or money order.
If your bank allows it, you can also set up recurring payments via your bank. You should follow your bank's bill pay instructions. But again, ensure the U.S. Small Business Administration is your payee. And be sure to include your loan number.
How to Repay an EIDL in Full
To pay back your loan in full and close your account, you'll need to contact the SBA for a payoff amount. The easiest way to do so is by reviewing your monthly statement. You can also call customer service at (833) 853-5638 to request your payoff amount.
Once you have your amount, you simply fill out the 1201 Borrower Payment form and submit it with your payment.
Can I Sell My Business If I Have an EIDL?
With few exceptions, no. You cannot sell a business with an EIDL loan balance attached to it (though you can sell it if the loan is paid in full and closed). There are a few reasons why. First, the buyer's lender will want the business to be owned "free and clear," i.e., no loans or liens attached.
Second, many loans were obtained with small business owners' personal guarantees. That can make things messy if the new owner defaults on the loan, as the lender could theoretically go after the previous owner. The easiest thing to do is pay the loan before selling your business.
Still want to sell? You can always try to transfer loan ownership—though the likelihood of being denied is pretty high.
You'll need to make this request directly to the SBA and ensure the borrower has permission from their bank to acquire a business with an additional lien.
Can My SBA EIDL Be Forgiven?
While some SBA loans are forgivable, the Economic Injury Disaster Loan program doesn't offer loan forgiveness. But, some businesses are eligible for the Targeted Advance, which provides up to $10k in loan forgiveness, or for the Supplemental Targeted Advance, which forgives up to $5,000. To qualify, businesses must operate in low-income communities that meet additional criteria.
Finally, there has been heavy lobbying by various small business organizations, including the National Restaurant Association. They have aimed to make some or all of the proceeds from these loans forgivable and to lower interest rates to make them as advantageous as their counterpart, the Paycheck Protection Program (PPP) loans.
In the future, it may be possible to have your loans forgiven. Until then, be sure to comply with the terms of your repayment fully.
What Happens If I Can't Pay Back My EIDL?
If you believe you're at risk of becoming delinquent and defaulting on your loan, your first step should be to speak with your lender. The bank or credit union you worked with may have options to renegotiate your loan terms to lower your payments.
If you avoid working with your lender, you run the risk of going into default. In that event, your lender can foreclose on the property you used as collateral for your loan. And, because borrowers sign a personal guarantee as part of the lending agreement, the borrowers are then personally responsible for paying back the loan. Even if they go out of business.
Additional resources are available at www.SBA.gov.
Frequently Asked Questions
Are current SBA disaster business loans deferred?
Yes. COVID-19 Economic Injury Disaster Loans are currently deferred for 30 months after their distribution date (listed on the first page of your loan documents). During the deferral period, you can still make payments or pay off the loan early without penalty. Balances kept during the deferral period continue to accrue interest, which is compounded daily.
Businesses that pay nothing during the deferral period will amass a fairly large interest balance. While the additional interest doesn't affect the monthly payment amount during the loan period, borrowers are responsible for paying the additional interest in one lump sum at the end of the loan. This is known as a balloon payment.
For example, let's say a business accumulates $3,000 in interest during the deferral period. That balance will be left over at the end of the loan period (plus the 30 years of interest it earns).
How do I check my SBA EIDL loan balance?
Go to the SBA Capital Access Financial System website to log into your online account. Your loan balance should be listed on your home page. You can contact SBA Disaster Assistance customer service center by phone by calling (833) 853-5638 and requesting your account balances.
Do I have to pay my Covid EIDL loan back?
With few exceptions, EIDL borrowers must pay their loans back. If you received a Targeted Advance or Supplemental Targeted Advance, the portion of your loan related to the advance is forgivable. But the remaining portion must be repaid.
Businesses that file for bankruptcy and have a loan under $25,000 may be able to discharge their loans. But, lenders may be able to pursue borrowers personally if they signed a personal guarantee during the origination process.
Businesses that received loans over $25,000 are less likely to be able to discharge their loan via bankruptcy.
Pay Your Loan ASAP—Or Talk to Your Lender
When it comes to COVID-19 EIDL loans, the best thing you can do is pay them off ASAP—and avoid extra interest. Even though these are considered low-interest loans, they can still cause a headache for entrepreneurs since that interest can compound over the life of the loan.
If you're struggling to pay them off, get in touch with your lender. They might be able to help you renegotiate your loan terms—and get lower monthly payments.
And remember, you could only defer this loan for 30 months—so your repayment date may be coming up soon. Make sure to log into the SBA portal to check when your first payment is due or look at the date of the note you received first and add 30 months to it.
