The Small Business Administration (SBA) created the Economic Injury Disaster Loan (EIDL) program to aid small businesses in recovering from financial damages brought on by catastrophes. The program provides qualified firms with low-interest loans that can be used to pay for a variety of costs, such as payroll, rent, and utilities. What occurs, though, if you are unable to repay your EIDL loan?
The SBA has the power to sue you or your company if you are unable to repay your EIDL loan. The agency has the right to place a lien on your assets, giving them the right to take possession of your home or other assets in order to recover the unpaid debt. The SBA may also send your case to the Treasury Department for collection, which may lead to steps such as wage garnishment, offset of tax refunds, or other collection measures.
Depending on the lender and loan type, different business loans have different average interest rates. The Federal Reserve reports that the typical interest rate for small business loans is from 4.5% to 6.5%. However, depending on your credit score, financial history, and other circumstances, the interest rate may be greater or lower.
You must fulfill a number of criteria in order to qualify for a business loan, including having a strong company plan, a good credit score, and consistent revenue. Traditional banks may make it difficult for startups to obtain loans since they sometimes demand a history of profitable operations. The SBA’s 7(a) lending program is one alternate lender and program that provides loans to entrepreneurs.
There are various choices available if you need capital for your startup. You might take into account venture capitalists, angel investors, crowdfunding, or government funds. Before determining which choice is ideal for your company, you should weigh the benefits and drawbacks of each.
In conclusion, the SBA may sue you or your company if you are unable to repay your EIDL loan. Startups may find it tough to obtain loans from conventional banks because the average interest rate on a company loan fluctuates depending on a number of criteria. To identify the one that is best for your company, you should investigate the other funding sources that are accessible.