Basic EIDL Terms
The SBA Economic Injury Disaster Loan (EIDL) program provided loans up to $2 million at 3.75% interest for businesses (2.75% for nonprofits) with 30-year repayment terms. Monthly payments began 30 months after the loan was disbursed. The loans were made directly by the SBA, not through banks. As of 2026, all EIDL loans are in active repayment.
Collateral Requirements
EIDL loans over $25,000 are secured by a general security interest (UCC lien) on all business assets. Loans over $200,000 also require personal guarantees and may require real estate collateral. The SBA files a UCC-1 financing statement, creating a lien on your business equipment, inventory, accounts receivable, and other assets. This lien affects your ability to sell business assets or obtain other financing.
Personal Guarantee Implications
If you signed a personal guarantee (required for loans over $200,000), the SBA can pursue your personal assets if the business cannot pay. This includes personal bank accounts, real property, and other assets. Bankruptcy may discharge the personal guarantee -- consult a bankruptcy attorney if you are facing personal liability on an EIDL.
Subordination and Refinancing
The SBA's UCC lien takes priority over most subsequent creditors. If you need other financing, you may need to request a subordination agreement from the SBA, which allows another lender to take priority. The SBA will generally subordinate if the new financing helps the business survive and does not impair the SBA's collateral position.
Frequently Asked Questions
Can I refinance my EIDL loan?
The SBA does not allow refinancing an EIDL with another SBA loan. However, you can use a conventional loan to pay off the EIDL. Whether this makes financial sense depends on the interest rate -- 3.75% is quite low.
What happens if my business closes?
You are still responsible for the loan. The SBA will liquidate business assets first, then pursue personal guarantors. If the business has no assets and you have no personal guarantee, the SBA's recovery options are limited.
Is the EIDL loan tax-deductible?
The interest on the EIDL loan is deductible as a business expense. The principal is not deductible because it was not income when received (loans are not taxable income).
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