Q&A on the Small Business Administration's (Sba) Economic Injury Disaster Loan (Eidl) Program

Q&A ON THE SMALL BUSINESS ADMINISTRATION’S (SBA) ECONOMIC INJURY DISASTER LOAN (EIDL) PROGRAM Updated June 24, 2020

The following are questions we received from members on the EIDL program. We communicated those questions to the SBA Region 7 office, and this is a summary of what we heard back. These answers are not official answers from the SBA and are subject to change and further legal interpretation. Nebraska Farm Bureau would encourage everyone who is interested in utilizing EIDL to contact the SBA directly at 1-800-659-2955 or [email protected]. Q: If I receive an EIDL loan, what will be the process of SBA getting a secured interest or collateral for the loan? A: For EIDL loan amounts over $25,000, the SBA will require the borrower provide SBA with a blanket UCC-1 financing statement which will be filed against all of the business collateral, such as tangible personal property, equipment, inventory, livestock, crops, etc., (not real estate), granting the SBA a security interest in the business collateral. A UCC-1 financing statement is a legal document that grants the lender (SBA) a security interest in the business collateral. This authorizes the lender, in the event of default, to seize, foreclose and even sell the underlying business collateral if the borrower fails to repay the loan. UCC-1 financing statements typically identify tangible personal property as collateral, which can include vehicles, office equipment and fixtures, investment securities, inventory, receivables, letters of credit, and other tangible items of value. Again, the SBA will not require real property to be used as collateral.

Q: Will my other lenders lose their lien priority position to the SBA? A: When a lender files a UCC-1, it would be filed with the Nebraska Secretary of State’s office and once filed, the lender (SBA) is said to “perfect its security interest.” If the borrower has loans from more than one lender, the first lender to file the UCC-1 is first in line, thus establishing a first lien position upon the borrower’s assets identified in the financing statement. The first UCC-1 filer holds a first-position lien, the second filer hasa second-position lien, and so forth. Usually, the first-position lien must be completely satisfied before the second- position lien holder can receive any remaining collateral. In filing the UCC-1 under the EIDL loan program, the SBA will take whatever position is available at the time it’s lien is filed.

Q: If a farmer/rancher has an EIDL loan, and sells grain or livestock, will SBA’s name be on the check from the buyer of the grain or livestock? (Due to the UCC-1 Filing.) If so, how will the farmer go about getting SBA to sign off on the check so the farmer can deposit it in his/her bank? A: According to the SBA, the answer is no. However, we still have several questions regarding this issue. The SBA has said given the amount of interest the SBA has received on both EIDL and the Paycheck Protection Program (PPP), they won’t get that involved at this time.

Q: Is EIDL money still available? A: For a few weeks EIDL was only open for agricultural businesses, however it was recently reopened for businesses outside of agriculture. While loans have been capped at $150,000, we expect the program to run out of money sooner rather than later.