If you took out an SBA Economic Injury Disaster Loan (“EIDL”) during the pandemic and are now behind on making payments, you are not alone. Many Georgia business owners face the same problem.
The COVID-19 EIDL program gave qualifying small businesses low-interest loans during the pandemic, but many borrowers now struggle to repay them.
Many borrowers had to start making monthly payments 30 months after receiving funds. Meanwhile, interest continued to accrue during deferment. As a result, many business owners now face larger balances and a heavier repayment burden. For many businesses, this repayment structure created a real risk of default.
If you are facing an SBA EIDL default, waiting to address it usually makes the problem harder to fix. Acting early generally gives you more options to protect yourself, your business, and your assets.
What Happens if You Default on an SBA EIDL Loan in Georgia?
Missing one payment does not usually mean immediate seizure of assets or other drastic action. Continued delinquency can lead to more serious consequences.
Depending on the loan status and current SBA procedures, some borrowers may still qualify for payment assistance or other servicing options. This may include a temporary reduction, a modified payment plan, or other assistance. However, the SBA may also refer the account to federal collection, where the process often becomes more aggressive and harder to resolve.
The earlier you address the problem, the more options you generally have.
Why Does Georgia Law Matter in an SBA EIDL Default?
Although federal law governs EIDL loans, Georgia law may govern certain aspects of the enforcement process when collection efforts involve a personal guaranty, business collateral, or Georgia real estate.
In other words, federal law may govern the loan program itself, but Georgia law often affects how creditors enforce rights against people and property here. That becomes especially important when the issue concerns guarantor liability, repossession of business assets, or foreclosure involving Georgia real estate.
That is why these cases often require attention to both the federal loan framework and Georgia enforcement rules.
Can You Resolve an EIDL Default Before it Gets Worse?
In many cases, yes.
Resolving an SBA loan problem starts with addressing it early.
The right approach may involve requesting payment assistance from the SBA, applying for a loan modification or other servicing action, negotiating with the SBA, or reviewing your loan paperwork to understand exactly what you pledged.
In some circumstances, the SBA may allow servicing actions that address assumption, collateral changes, guarantor issues, lien subordination, or business closure and liquidation. While not every borrower will qualify for every type of relief, the key is understanding your options.
Are You Personally Liable for an SBA EIDL Loan?
This is one of the biggest questions Georgia business owners ask. The answer depends on the loan documents you signed.
Don’t assume the debt is limited to the business entity just because you operated through an LLC or a corporation.
If you signed a personal guaranty, you may be personally responsible for the debt if the business cannot pay. The scope of that liability depends on the wording of the guaranty, the surrounding loan documents, and Georgia law.
What Happens to Business Collateral After an EIDL Default?
If your EIDL loan is secured by business assets, such as equipment, inventory, or accounts receivable, the SBA or another party enforcing the loan may seek to enforce its rights against that collateral after a default.
In Georgia, a secured creditor may take possession of collateral after default. However, there are rules governing this. The creditor must do so without “breaching the peace,” which means they can’t use force, threats, or deception.
Before selling the collateral, the creditor must send you a notice that meets specific legal requirements. In some situations, a creditor may propose to keep the collateral instead of selling it, which is called “acceptance in satisfaction,” but that requires your consent and comes with its own rules.
What if an EIDL Loan Involves Real Estate in Georgia?
Some borrowers secured their EIDL loans with real property. If that’s your situation, Georgia’s foreclosure laws add another layer.
Georgia allows nonjudicial foreclosure, meaning a lender can foreclose without going to court. If the lender wants to collect the amount still owed after the foreclosure sale, Georgia law generally requires the lender to obtain court confirmation of the sale within 30 days. At that hearing, the lender must show that the sale brought the property’s true market value.
If the lender does not receive confirmation or the property is sold for less than fair market value, the lender may be limited in its ability to collect the remaining balance. Georgia also has notice requirements for foreclosures that must be followed correctly.
What Should You Do if You Are Behind on EIDL Payments?
If you are behind on EIDL payments, do not assume the problem will resolve itself.
Gather your loan documents, including the promissory note, any guaranty agreement, the security agreement, and any UCC filings. Check your payment status to see whether you’re still in the SBA’s servicing window or whether your account has already been referred to Treasury.
An experienced Georgia business attorney can review your documents, assess your exposure, and help you choose the best path forward before your options narrow.
Speak With a Georgia Business Attorney About Your EIDL Loan
If you’re a Georgia business owner dealing with SBA loan trouble, the business attorneys at Thrift McLemore can help you understand where you stand and what options may still be available.
Call us today at (678) 882-0830 or click here to schedule a consultation.
