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Archive for category: Finance

What happens to my EIDL loan if my business closes?

Blog, Finance, SBDC News

EIDL-Payback

by Simplice Essou, CPA | October 27, 2022

Editor’s Note: Florida SBDC at USF business consultants are not attorneys. This article does not represent binding legal advice. Please consult an attorney/lawyer to discuss the specifics of your business situation.

What is the EIDL?

In the wake of the COVID-19 pandemic, millions of small businesses have received federal aid in the form of the Paycheck Protection Program (PPP) loan and/or the Economic Injury Disaster Loan (EIDL). These programs helped save many small businesses. However, despite the federal assistance, many others did not survive. Business owners who were forced to close their doors may be asking themselves if they are responsible for the debts contracted through the EIDL program.

The EIDL is intended to help businesses meet financial obligations and operating expenses that could have been met had a disaster not occurred. For example, a business owner whose business got shut down due to COVID-19 restrictions could potentially qualify for an EIDL to help cover expenses such as rent and working capital (equipment repair, inventory, etc.). For-profit borrowers under the EIDL program could get a fixed 3.75% rate, while nonprofits could get a 2.75% rate. Borrowers have up to 30 years to pay the loan back.

Whether a loan guarantee was needed for the EIDL depended on the amount of the loan. For an EIDL of $25,000 or less, no collateral or personal guarantees were required. That means that for the vast majority of defaults on these small loans, business owners’ personal assets will not be at risk of seizure. In the event of a business default on a federal government loan, the lending financial institution may report the default to credit scoring companies. This may make obtaining loans in the future more difficult and more expensive.

In general, EIDLs between $25,000 and $200,000 did require collateral but generally do not require personal guarantees. That means that collateral such as inventory or business equipment could be seized in the case of a default. However, the owner’s personal assets are generally safe.

For loan amounts more than $200,000, collateral and personal guarantees were required. 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-forgivable loan, contrary to the Paycheck Protection Program (PPP).

Are EIDL loans guaranteed? What happens if I cannot pay?

If your business cannot repay the EIDL loan the first thing you should do is determine whether your loan is in default or just delinquent. These are two different states in the life of a loan and will determine the next steps. Delinquent means that you are behind on your loan repayment. Default happens when the lender determines the business will not be able to pay the loan back.

What happens if I default?

Defaulting on a federal loan can have serious consequences. When confronted with a default or prospect of a default, it is important to contact the U.S. Small Business Association (SBA) and discuss your situation.

In case you have difficulties getting through to the SBA, consider consulting a loan attorney to explore your options.

For some business owners, filing for bankruptcy may be best course of action. In that case, working with an experienced bankruptcy attorney is crucial. It is important to remember the pandemic has created an unprecedented situation and that many other business owners are in a similar situation.

Author

Simplice Essou

Simplice Essou, CPA

Certification Consultants, Consultants, Essou, Tampa

Florida SBDC at USF
Specialty: Accounting, Business Planning, Financial Management, Startup

Simplice Essou joined the Florida SBDC at University of South Florida in March 2020 as a business consultant, bringing almost two decades of experience in accounting, finance and entrepreneurship. Essou started and managed an international consulting firm in 2008, specializing in advising African government on issues related to small-to-medium-enterprise development. Previously, he has worked for large corporations, including Bank of America, BP-Amoco, General Electric, and Lehman Brothers. These roles gave him a wide breadth of experience, including the ability to handle forecasting, analyze revenue entries, actively communicate account receivable risks, and lead day-to-day analysis and reporting for credit losses. He earned an MBA in finance from the Wharton School at University of Pennsylvania and a bachelor’s in accounting from the University of Southern Mississippi.

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Celebrating the Legacy of Black Business Owners and the African American Entrepreneurial Experience

Blog, Economic Development, Featured News, Finance, Growing Your Business

by Yolanda Cowart | January 19, 2022 Do you ever look at the African American experience and feel pride in all that we’ve managed to accomplish?  Blacks are faced with constant change and challenges in the business arena. While managing and operating any business is tough, people of color face many unique obstacles. Black business owners are often marginalized and hindered from […]

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Show Me the Money: Funding Opportunities for Startups and Minorities Now Is the Time to Persue Funding the American Dream

Blog, Economic Development, Featured News, Finance, Growing Your Business

by Yolanda Cowart | January 19, 2022 For the last few years, the world has been in a constant state of chaos.  First, it was political upheaval, then racial unrest, and now a major health crisis.  We’ve become almost used to the tumult, to the extent that we barely bat an eye when a new […]

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Tax Preparation Tips for Businesses

Blog, Featured News, Finance, SBDC News

by Simplice Essou, CPA | December 28, 2021 For most taxpayers the preparation of and filing for taxes can be a daunting task. However this can be mitigated by adequate preparation and yearlong bookkeeping and accounting. Do not wait until the end of the year to start working on the bookkeeping. It is essential that […]

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Accounting Tips for E-commerce Businesses

Blog, Featured News, Finance, SBDC News

by Simplice Essou, CPA | December 27, 2021 For most business owners the accounting function is one they would rather not deal with. However, it is one of the most important functions for a business. For e-commerce, as for any type of industry, accounting is a vital function of your business as it allows for […]

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5 Common Mistakes Small Businesses make with QuickBooks

Blog, Featured News, Finance, Growing Your Business, SBDC News

by Bill Burnham, | October 19, 2021 In my work as a QuickBooks Online Pro Advisor and business consultant, I consult with many QuickBooks users. In working with these businesses I have seen a recurring pattern of mistakes small business users make when using QuickBooks. These mistakes often lead to inaccurate financial information, extra work for […]

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Is Emergency Funding Giving You A False Sense of Security?

Blog, Featured News, Finance, Marketing, SBDC News

by Corey McCaster | August 13, 2021 The pandemic has affected business owners in a variety of ways. Few business owners were completely unscathed. Some started to experience a negative impact but were able to adapt and adjust to turn it into a successful year. Then there were some for which the pandemic hit too […]

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Passion versus Wisdom: Turning a Great Idea into a Business Venture

Blog, Featured News, Finance, Growing Your Business, SBDC News

by Bill Burnham | June 17, 2021 It’s a battle that is as old as time itself. At one point or another we have all gone through it. Passion and wisdom are enemies both fighting for our attention, our time, and our money. Wisdom is the quiet, logical one while passion is emotional and outspoken. […]

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Three Steps to Maximize Penny for Pinellas Contracting Opportunities

Blog, Featured News, Finance, Government Contracting, Growing Your Business, SBDC News

by Yolanda Cowart | March 9, 2021 Government contracting is often a maze of acronyms complicated by the various agencies offering contract opportunities. After working with hundreds of small businesses in the public sector that include information technology, manufacturing and construction industries – it’s clear that the process can be confusing for even the most […]

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Tips for Transitioning from a Subcontractor to a Prime

Blog, Featured News, Finance, Growing Your Business, SBDC News

by Yolanda Cowart | June 22, 2020 Many of my clients struggle when making the jump from a subcontractor to a prime government contractor. There are two main hurdles for them – resources and business infrastructure. Business infrastructure requires business owners to work on internal items, such as business, personnel, technology, facility and operational plans. […]

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The Florida SBDC at the University of South Florida is a member of the Florida SBDC Network, a statewide partnership program nationally accredited by the Association of America’s SBDCs and funded in part by the U.S. Small Business Administration, Defense Logistics Agency, State of Florida, and other private and public partners, with the University of West Florida serving as the network’s lead host institution. Florida SBDC services are extended to the public on a nondiscriminatory basis. Language assistance services are available for limited English proficient individuals.

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