If a business that has received an Economic Injury Disaster Loan (EIDL) closes, the business is still responsible for repaying the loan according to the terms of the loan agreement. Here's what typically happens:
Loan Repayment Obligation: Closing the business does not eliminate the obligation to repay the EIDL. The borrower remains responsible for repaying the loan amount, including any accrued interest, based on the terms outlined in the loan agreement.
Loan Terms: The borrower must continue to make regular loan payments according to the repayment schedule specified in the loan agreement. Failure to repay the loan as agreed can result in default, which may lead to additional penalties, fees, and negative effects on the borrower's credit.
Communication with SBA: If the business is unable to repay the loan, it's essential to communicate with the Small Business Administration (SBA), which administers the EIDL program. The borrower may be able to request a modification of the loan terms, such as extending the repayment period or reducing the monthly payments.
Asset Liquidation: In some cases, if the borrower cannot repay the loan and there are assets remaining from the business, the SBA may require the liquidation of those assets to repay the outstanding loan balance.
It's crucial for businesses that have received EIDL funds to understand their repayment obligations and communicate with the SBA if they encounter financial difficulties that affect their ability to repay the loan.
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