What Happens To Eidl Loan If Business Is Sold

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 If a business that has received an Economic Injury Disaster Loan (EIDL) is sold, the status of the EIDL loan will depend on several factors, including the terms of the sale, the repayment status of the loan, and any agreements made with the Small Business Administration (SBA) regarding the loan.

Here are some possible scenarios:

  1. Loan Repayment by Seller: If the terms of the sale agreement stipulate that the seller (the original borrower) remains responsible for repaying the EIDL loan, then the seller will continue to be obligated to repay the loan even after selling the business. In this case, the buyer assumes ownership of the business but is not responsible for the EIDL loan.

  2. Loan Assumption by Buyer: In some cases, the buyer may agree to assume responsibility for the EIDL loan as part of the purchase agreement. The buyer would then become responsible for repaying the remaining balance of the loan.

  3. Loan Repayment from Sale Proceeds: If the sale of the business generates proceeds, the seller may use a portion of the proceeds to repay the outstanding balance of the EIDL loan before transferring ownership to the buyer. This would clear the loan obligation before the sale is finalized.

  4. Notification to the SBA: Regardless of the specific terms of the sale, it's essential for the seller to notify the SBA of the change in ownership or sale of the business. The SBA may require documentation related to the sale and may need to update its records accordingly.

  5. Consultation with Legal and Financial Advisors: Selling a business that has an outstanding EIDL loan can be complex, and it's advisable for both parties involved to seek guidance from legal and financial advisors to ensure that the sale is structured appropriately and that all obligations are addressed.

Ultimately, the handling of an EIDL loan in the event of a business sale will depend on the specific circumstances and agreements made between the parties involved. It's crucial for both the seller and the buyer to understand their respective responsibilities and obligations regarding the loan and to work together to ensure a smooth transition of ownership.

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