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October 26, 2021 
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0 comments Can You Sell Your Business If It Has An SBA EIDL Loan?
In this video we answer one common question, “Can I sell my business if it has an SBA EIDL Loan?”. As small business owners know, the Covid-19 EIDL Loan from SBA has many rules and regulations on how you can use the funds and how to manage your business. Many small business owners that got the SBA EIDL Loan do not know that they can sell their business, but they have to to ask for authorization from the SBA first.
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This video is intended for education purposes and should not be taken as legal, financial or tax advice. You should consult with a professional about your unique situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. are providing educational content to help small business owners and individuals become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience. Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. or its members cannot be held liable for any use or misuse of this content.
Transcript
A common question that we get here at FreedomTax Accounting is, I have a business that received a covid-19 SBA EIDL loan and now I want to sell it. Can I send my business if it has received an SBA EIDL loan? That’s what we are going to talk about in this video.
Hello from FreedomTax Accounting, we are an accounting firm where we have been providing quality tax and accounting services now for over 20 years. If you are new to this channel, we provide strategies for small business owners so they can achieve their financial goals; if that’s a topic that you like, please subscribe to our channel.
Now, we are recording this video on October 26th, 2021. We always emphasized the date on the recording of any video relating to the PPP or the EIDL, because these loans have been constantly changing, so that’s the importance of subscribing to our channel so you’re always up to date with the most current and correct information relating to these SBA loans.
Now, many business owners in 2020 and in 2021, they have received an SBA EIDL loan, but now there is an opportunity to sell their business and they don’t know if they can sell their business if their business have an SBA EIDL loan; because remember the SBA EIDL loan has very strict rules of how you can use it and how you can manage your business moving forward as long as you have this SBA EIDL loan.
The answer is yes. Yes, you can sell your business if you received or your business received an SBA EDIL loan, but you need to ask permission from the SBA, you need authorization from the SBA in order to sell your business. Once you contact the SBA to let them know that you want to sell your business, even though now your business has an EIDL loan, they are going to give you one of three options, or they are going to tell you there’s one of these 3 things is what’s going to happen; is not an option, they are going to tell you what you need to do.
They first option or the first thing they may tell you is “No, you need to pay off your loan before you sell it”, so that’s one scenario that the SBA may tell you to do, that you need to pay off your loan, your SBA IEDL loan, before you sell your business.
Another scenario would be that the SBA tells you “Well, sell it and from the proceeds of the sale pay off the loan”; so, they are going to allow you to sell your business, but from the money you get from the sale you have to pay back the loan.
The third scenario that the SBA may tell you is “We are going to transfer the ownership of the loan to the new owner”, so that’s something that may happen, but in order to do that the SBA now is going to qualify the new owner, because the new owner of your business needs to comply with the loan requirements in order to transfer the loan from your business now that he is the new owner; because remember, the new has to now sign as a guarantor he may have to put collateral that’s under his name.
So, basically those are the 3 scenarios that can happen if you want to sell your business if it has received an SBA EIDL loan. First, if you want to sell your business if it received an SBA EIDL loan, you have to communicate with the SBA first, and you need to ask for authorization from the SBA to sell your business. And 3 things may happen; they’re either going to tell you “You need to pay your loan in full”, or they are going to tell you “Sell it and from the proceeds of the sale pay off the loan”, or “We are going to have to qualify the new owner to see if we can transfer the ownership of the loan to the new owner”.
So, now you know that you can sell your business if your business received an SBA EIDL loan, but you need authorization from the SBA first.
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