SBA EIDL Loan Terms | Is It Worth It For $25K+?

[Michael Glaser]

Thought the EIDL contract terms for those approved needed its own thread.

I was approved and I'm at the signature stage of a loan above $25K. I understand the collateral, but the Requirements for Relative Collateral are a bit much. Not to mention all the other verbiage about requesting an audit of your business at your expense whenever they feel like it. If it were a bank I wouldn't have a problem, but the federal government is another issue. 

I'm interested in what others think of the terms especially the ones below: 

For loan amounts of greater than $25,000, Borrower hereby grants to SBA, the secured party hereunder, a

continuing security interest in and to any and all “Collateral” as described herein to secure payment and

performance of all debts, liabilities and obligations of Borrower to SBA hereunder without limitation, including

but not limited to all interest, other fees and expenses (all hereinafter called “Obligations”). The Collateral

includes the following property that Borrower now owns or shall acquire or create immediately upon the

acquisition or creation thereof: all tangible and intangible personal property, including, but not limited to: (a)

inventory, (b) equipment, (c) instruments, including promissory notes (d) chattel paper, including tangible

chattel paper and electronic chattel paper, (e) documents, (f) letter of credit rights, (g) accounts, including

health-care insurance receivables and credit card receivables, (h) deposit accounts, (i) commercial tort claims, (j)

general intangibles, including payment intangibles and software and (k) as-extracted collateral as such terms

may from time to time be defined in the Uniform Commercial Code. The security interest Borrower grants

includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all

products, proceeds and collections thereof and all records and data relating thereto.

· For loan amounts of $25,000 or less, SBA is not taking a security interest in any collateral.

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SBA Form 1391 (5-00) Ref 50 30

Doc # L-01-0476006-01

SBA Loan #8496557408 Application #3600074047

DocuSign Envelope ID: CA47909F-9BAE-44B7-ACA5-7A831F089087

In Process

REQUIREMENTS RELATIVE TO COLLATERAL

· Borrower will not sell or transfer any collateral (except normal inventory turnover in the ordinary course of

business) described in the "Collateral" paragraph hereof without the prior written consent of SBA.

· Borrower will neither seek nor accept future advances under any superior liens on the collateral securing this

Loan without the prior written consent of SBA.

USE OF LOAN PROCEEDS

· Borrower will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by

disaster occurring in the month of January 31, 2020 and continuing thereafter and to pay Uniform Commercial

Code (UCC) lien filing fees and a third-party UCC handling charge of $100 which will be deducted from the

Loan amount stated above.

REQUIREMENTS FOR USE OF LOAN PROCEEDS AND RECEIPTS

· Borrower will obtain and itemize receipts (paid receipts, paid invoices or cancelled checks) and contracts for all

Loan funds spent and retain these receipts for 3 years from the date of the final disbursement. Prior to each

subsequent disbursement (if any) and whenever requested by SBA, Borrower will submit to SBA such

itemization together with copies of the receipts.

· Borrower will not use, directly or indirectly, any portion of the proceeds of this Loan to relocate without the

prior written permission of SBA. The law prohibits the use of any portion of the proceeds of this Loan for

voluntary relocation from the business area in which the disaster occurred. To request SBA's prior written

permission to relocate, Borrower will present to SBA the reasons therefore and a description or address of the

relocation site. Determinations of (1) whether a relocation is voluntary or otherwise, and (2) whether any site

other than the disaster-affected location is within the business area in which the disaster occurred, will be made

solely by SBA.

· Borrower will, to the extent feasible, purchase only American-made equipment and products with the proceeds

of this Loan.

· Borrower will make any request for a loan increase for additional disaster-related damages as soon as possible

after the need for a loan increase is discovered. The SBA will not consider a request for a loan increase received

more than two (2) years from the date of loan approval unless, in the sole discretion of the SBA, there are

extraordinary and unforeseeable circumstances beyond the control of the borrower.