Watch the video below or scroll down to read the recap
In this workshop, we cover all things concerning your COVID Economic Injury Disaster Loan (EIDL) in conjunction with the U.S. Small Business Administration.
You can download the workshop slides by clicking on the below PDF.
Key Notes from the Presentation:
An Economic Injury Disaster Loan (EIDL) is NOT Forgivable
COVID EIDL is a loan and must be repaid.
The “Advance” funds were a grant - ONLY EIDL “Advance” funds were a grant.
All Obligors are required to repay - Every Obligor has direct liability for repaying – that means the actual Borrower, anyone who agreed to guarantee that loan (the Guarantor), and anyone who agreed to assume liability for repayment– called the Assumptor.
The Process
Loan Approval - After your loan was approved and dispersed to you, the loan moved from the Disaster Loan Processing Center to “regular servicing” status.
Loan Actions Servicing - All servicing was done by two centers – one in Birmingham and one in El Paso for western states. However, the COVID-EIDL loans are slowly being transferred to a new COVID-EIDL Disaster Loan Servicing Center. They will handle only COVID-EIDL loans.
Default - If you default on the loan, it will move from “regular servicing” status to “liquidation” status and then the loan will be managed by the National Disaster Loan Resolution Center in Santa Ana, California.
Permission Needed for Collateral
Need SBA permission to sell/transfer - You cannot sell or transfer any collateral (except inventory due to normal turnover) without SBA’s prior written consent.
Must maintain hazard insurance - You also need to preserve and maintain the collateral, and part of that includes providing hazard insurance coverage to at least 80% of the insurable value.
As a reminder: COVID-EIDL loans over $25k and up to $500k were secured with a UCC-1 Financing Statement. Collateral for this loan included the property that you owned then and will own thereafter and covers both tangible and intangible property. For EIDL loans over $500k, SBA filed the UCC-1 lien and took the best available mortgage on any real estate owned by the business. For more information, see your loan authorization and agreement.
Loans that Required Personal Guaranty
Reminder: All COVID-EIDL loans over $200k required that anyone with 20% or more ownership of the business sign a personal guaranty for the loan.
Record-Keeping Requirements
Keep itemized receipts and contracts - You’ll need to keep itemized receipts and contracts for all loan funds spent. That shouldn’t be a big deal because you’re maintaining the same information for your tax records already anyway. What is an itemized receipt? A receipt or document that contains the Business Name, Date, Item(s) Purchased, Price of Item(s), Total Amount, and Method of Payment of Purchase.
Purchase only American-made equipment and products, if feasible - The Loan agreement also asks you, to the extent feasible, to purchase American-made equipment and products with the proceeds of the EIDL Loan.
Documents can be required on demand - you need to be prepared to submit your records if SBA asks for them. SBA can also ask to inspect or have all assets appraised.
Appraisals & inspections of all assets
MySBA Loan Portal
Before today you would set up an account in the Capital Access Financial System (CAFS). As of today (3/23/2023), you can access your account information through the MySBA portal, which replaces CAFS. Here is the direct URL:(https://lending.sba.gov)
Advantages of this new portal:
You can use the same login credentials that you did for CAFS
You will be able to view loan details for all SBA loans you have
You can make a payment directly into the system and not have to go through pay.gov
Can access your statements and tax forms
You can send messages to SBA directly through the portal
If you didn’t sign up for CAFS because of the complexity, this portal should be easier to do so. Again, if you already have a CAFS account, use that login and password information to log into your MySBA Account.
Currently, Borrowers can only make new one-time payments on the MySBA Loan Portal, however, that will change soon and you will be able to make recurring payments in MySBA. The SBA let you know when that happens. Borrowers with recurring payments already set up on pay.gov should NOT schedule one-time payments in the MySBA Loan Portal because this will result in a duplicative payment. We are strongly suggesting that you confirm your payments on pay.gov and ensure you’re not accidentally making duplicate payments currently.
Who to Contact
For General questions and for copies of loan documents, to get your loan number, or more, you should reach out to the COVID-EIDL Contact Center at 833-853-5638 or email DisasterCustomerService@sba.gov
For technical assistance with using MySBA, you can contact the MySBA Help Line at 833-572-0502 or email CLS@sba.gov
Email is often faster for general inquiries.
Servicing
When you go into MySBA, that system will have assigned your account to either the Birmingham Center or the new COVID-EIDL Disaster Loan Center. Birmingham Center’s number is 800-736-6048 x 0429. You can also email Bham.Realty@sba.gov. COVID-EIDL Center's number is 833-853-5638 x 7029. You can also email CovidEIDLServicing@sba.gov.
All COVID-EIDL loans are being transferred to the COVID-EIDL Service Center.
Note that the phone number for the COVID-EIDL customer contact center and the Servicing Center are the same. You’ll be asked to choose the help you need.
How to Email
We suggest contacting the Service Center using email, that way you have a written record of your communication with them. If you do email them, there is a way to help get a reply much faster. In the subject line, make sure you include your company name, the loan number, and what servicing action you want to be taken. Example: Subject - ABC Business, Inc. Loan #12345678 09, [Release of Collateral]
Changes to Your Business: Name Changes, Mergers & Structure Changes
You must inform SBA of all these changes before they take place.
Name Change - Note Modified and UCC-3
Merger - Assumption, Note Modified and UCC-3 - No action needed if the original entity continues to operate.
Legal Structure - Assumption, Note Modified and UCC-3
Release of Collateral
There is an application for the Release of Specific Collateral. If your business will continue to stay open, SBA will release collateral if it involves routine business transactions or normal business operations. In other situations, expect to pay down 25% of the loan balance.
Business Open - Release with no paydown, Routine transactions, Equipment trade-ins / 3rd party sales, Must reinvest in business otherwise Paydown 25% - Equipment trade-ins and 3rd party sales are approved without any type of pay down requirement if the borrower demonstrates use of the sales proceeds to reinvest into the business for working capital.
Business Closed - Must be paid in full, Business dissolution, Final tax returns - you need the collateral released for a sale of the assets, you must repay the entire loan. And you’ll need to provide proof of the dissolution of the business or at the very least the final tax returns.
Subordination
If you have collateral attached to your COVID-EIDL loan, and you need a loan from a bank or credit union, SBA may allow what’s called a Subordination-- that is, SBA can allow itself to be ranked behind another lender on that collateral. There is also an application for this. COVID-EIDL loans are generally subordinated without a paydown if the request is for an SBA 7a, 504, and SBA Express Loan Program the business is renewing an existing loan or obtaining a working capital line of credit for normal business operations; or if the request is for factoring loans and purchase money security interest loans for machinery and equipment. Otherwise, the approval will depend on the specific facts of your case.
No Paydown - SBA Financing, Renewals, Factoring, Purchase $ Security
Paydown - Case Specific, 25% EIDL Balance, Cash out, Business Expansion - If you’re using the new loan to expand the business or to take cash out of the business, you’ll be asked to pay down at least 25% of the loan balance.
In addition to the application form, you’ll also need to submit other documents like a Borrower Authorization form (which allows SBA to release your information to your lender), a Commitment Letter or Agreement from your lender, a list of the collateral with the VIN or serial numbers, a copy of the UCC and proof of hazard insurance. The application the Service Center sends to you will have these requirements listed. The subordination process for COVID-EIDL has been streamlined and should only take 3-5 days if your application package is complete when submitted. Your lender will help you with this process. It's essential to know which Servicing Center your loan is handled by because EACH center has its own subordination application. Ultimately, all COVID-EIDL loans will be transferred to the new COVID-EIDL Service Center, but for now, your loan may be there or handled by Birmingham or El Paso Servicing Centers.
Sale of Ownership Interest
When you sell an ownership interest in your business and a new owner comes on board, that new owner will need to assume the loan. You must contact your Service Center for an application to receive the required prior written consent. That approval for the new owner to assume the loan is not automatic. Please ask your Service Center for more information.
New Owner - Assumption, Not automatic, 1-2 weeks processing
Old Owner - Not released, Even if substitute guarantor
Sale of Business
If you are selling your business outright and will be paying off the COVID-EIDL loan, you’ll need to contact the Servicing Center for an accurate payoff statement and final payment instructions. However, if you intend to sell your business, but will NOT be using the proceeds to pay off the loan, you will need SBA’s prior written permission to complete that sale. If you don’t, that’s considered an automatic default.
Paying Off - No approval needed, Get accurate payoff & final payment instructions
Loan Remains - Prior written permission
Death of Any Obligor
If any Obligor dies, you need to alert your Service Center immediately. You’ll need to supply a copy of the death certificate and the point of contact for the estate. In addition to collecting the proceeds from any life insurance policy that may have been pledged as collateral for the loan, the SBA may need to take legal action against the estate to protect the ability to collect the balance owed on the loan.
Business Permanently Closes
If your business is permanently closing, you need to immediately alert the Service Center, which in turn should alert the National Disaster Loan Resolution Center who will contact you. If you don’t hear from them within a few days, then you should go ahead and contact the National Disaster Loan Resolution Center yourself. Just be sure to have your loan number and current contact information at hand.
National Disaster Loan Resolution Center: NDLRC.Servicing@sba.gov | 714-550-9566
Making Payments: 4 Ways to Make Payments
Make single payments at MySBA Loan Portal - Use your CAFS username and password to log in
Make recurring payments at PAY.gov. - 10-digit SBA loan, Payment Due Date, Payment Amount
Use online bill pay through your banking account - Payee = U.S. Small Business Administration, Account# = 10-digit SBA Loan Number, Payment Address P.O. Box 3918, Portland, OR 97208-3918
Mail your payment: Payee = U.S. Small Business Administration, Memo Field = 10-digit SBA Loan Number, Mail to U.S. Small Business Administration, P.O. Box 3918, Portland, OR 97208-3918
Have Problems? Email cls@sba.gov or call 833-572-0502 (Monday through Friday 8am-8pm)
Bulk and Early Payments
The system cannot handle bulk payments
Only payments made within 25 days of the next due date will advance the next payment date
Made a mistake? The Servicing Center can manually advance the payment date:
Access your COVID EIDL account in the new MySBA Loan Portal
Find your Servicing Center.
Contact that Servicing Center and ask them to manually advance your payments.
Payoff Amount
Contact the COVID-EIDL Contact Center at 833-853-5638 or email DisasterCustomerService@sba.gov
Go to MySBA Loan Portal - Add 10 days of accrued interest. Overpay? SBA will return that amount.
More information can be found at Make a payment to SBA.
Temporary Hardship Relief: Hardship Accommodation
Reduced payments for 6 months 10% (minimum $25)
Should be less than 60 days past due
Can be retroactive
Request at MySBA Loan Portal
Up to $200k: Request in MySBA. Go to loan summaries. Bottom right corner find. "Hardship Accommodation Plan"
Over $200k: Contact Service Center. Need Business Name, Loan Number, and "Hardship Accommodation Plan"
If Approved...
Interest will continue to accrue
Can voluntarily make larger payments
Regular payments resume after 6 months
Can be renewed or requested again
Default
Quick Facts If you Default...
Federal payments withheld
Not be eligible for other federal programs
If a “Charge Off,” you are still responsible
U.S. Treasury always knows
Default Happens if...
Violate any terms or conditions
Fails to pay any taxes
Bankruptcy
Change of ownership
Death
Change in financial condition that affects the ability to pay
SBA may...
Require immediate repayment
Take possession of Collateral
Dispose of Collateral Joint and Individual Liability
Identity Theft
What To Do:
Go to www.identitytheft.gov and create an Identity Theft Report.
Email to SBA at IDTheftRecords@sba.gov a copy of that Identity Theft Report, a copy of your photo identification issued by a Federal or state agency (driver’s license, state ID card, etc.)., a completed and signed Declaration of Identity Theft
Fax: (202) 481-5200
Mail: U.S. SBA Processing and Disbursement Center
Attn: ID Theft Records
14925 Kingsport Road Fort Worth, TX 76155
Best Practices
Keep a copy for your records
Submit only once
Expect 2-4 weeks of processing time
Past-due notices/calls will continue until the final determination email
Reported prior to February 2, 2021? Must still follow the process outlined
Place Fraud Alert on Credit Report
Ask for a credit report to review other new accounts www.annualcreditreport.com
Use resources at www.identitytheft.gov
Key Takeaways
EIDL loans must be repaid
Trouble making a payment? Contact your Servicing Center
Must report business ownership changes
Cannot dispose of collateral without prior permission
No mailed statements - Use MySBA Account
Every obligor is obligated to repay the full amount
Balloon payment is possible
There are consequences for a default
Final Thoughts
Read your Loan Agreement & Authorization completely
To login to the MySBA Portal use your CAFS username and password
Decide how you want to make payments - Recurring: www.pay.gov, or Your online bill payment. On-Time: MySBA, Your online bill payment, or mail.
Contact
Twitter: @SBA_WV
Phone: 304-623-5631, to reach Kimberly or Leo dial 304-347-5220 or you can email them at Kimberly.Donahue@sba.gov or Leo.Lopez@sba.gov
To hear the Q&A portion of the workshop, watch the recap video at the top of the blog and click on time marker 40:55.
Let's Get in Touch!
Jim Spencer, Executive Director Bluefield WV Economic Development Authority | jspencer@bluewv.org | (304) 902-2332 x 2405
Faith Blackwell, Administrative + Marketing Assistant
Bluefield WV Economic Development Authority | fblackwell@bluewv.org | (304) 902-2332 x 2408
