SBA EIDL Loan Servicing Tips for Lenders

EIDL loans have become a hot topic in SBA lending and more and more often we are hearing from lenders that need servicing actions completed on those loans for routine business transactions. The question that arises is how to go about requesting and obtaining approval. WBD will handle any EIDL subordination required for the 504 debenture, and we are also available to assist on any questions you have on subordinations required for the 504 ‘front-end loan’. Below you will find the ‘need to know’ items on all things EIDL…but first, a bit of a refresher on the EIDL loan parameters:

Who are EIDL loans serviced by?

The COVID EIDL Servicing Center (CESC) has been established to provide a centralized office for the servicing of COVID EIDL loans. There were over 1,700 employees on staff as of 1/24/24 to assist with these actions. Contact with CESC can be made by phone (833-853-5638) or by e-mail at CovidEIDLServicing@sba.gov.

What are the most common types of EIDL servicing requests the center sees?

• Subordinations
• Assumptions/Changes of Ownership
• Hardship Accommodations
• Re-Amortization of EIDL loans
• Release/Substitution of Collateral
• Refund/Payoff Requests
• Verification of Mortgage
• Liquidations

Where do I start if our bank has an EIDL servicing request?

Either a lender or a borrower may initiate a servicing action. Contact the EIDL Servicing Center (CESC) via email with specific details as to what servicing action is being requested. The intake team will get correct application documents out via email within 24 hours, sometimes same day. Note that the forms are not yet available to the public; however, SBA is working on providing access via www.sba.gov and on the customer’s MySBA Loan Portal.

What is the likelihood my servicing request will be approved by SBA?
The short answer is that it depends on the type of servicing request and details surrounding it; however, the applicant must be paid current to be eligible in all cases. See below for the most common types of actions requested:

Subordination

• COVID EIDL loans are generally subordinated without a paydown to allow the borrower to obtain additional SBA financing through the 7a, 504 and SBA Express loan programs.
• Routine subordination requests where the borrower is refinancing an existing senior loan or obtaining a working capital line of credit for normal business operations are generally approved without a paydown.
• Subordination requests involving factoring loans and purchase money security interest loans for M&E are generally approved without a paydown.
• Paydown requirements will exist for lien subordination requests for a cash-out, refinance of junior debt, business expansion, and buy-outs/buy-ins since EIDL loans were for operational disaster assistance, with funds not to be used for expansion.
• SBA may require a complete payoff of the EIDL loan based on specifics of the request.

Assumptions and Changes of Ownership

• If a sale/change of ownership is proposed by your borrower, contact the CESC for SBA prior written consent and the correct application form.
• Assumptions and change of ownerships are typically reserved for hardships, familial transfers, simple changes in entity structure, etc.; otherwise, a partial paydown or full loan payoff prior to the change will likely be required. An offer of paydown may be submitted by the applicant to SBA in the case of a request for an assumption but is subject to SBA approval.
• If there is a short sale or business closure, contact CESC by phone or email.
• SBA may require a complete payoff of the EIDL loan based on specifics of the request.

Release/Substitution of Collateral

• Equipment trade-ins are generally approved without any type of pay-down requirement as are third party sales of equipment if the borrower demonstrates a hardship with need to retain the cash for working capital.
• Requests to release all collateral due to sale of business requires the EIDL loan be paid-in-full
• SBA may require a complete payoff of the EIDL loan based on specifics of the request.

What are the standard timelines for servicing requests?

• Subordinations:  1-2 business days for initial review, 3-5 days for document preparation if approved.
• Assumptions/Change in Ownerships:  2-3 business days for initial review, 2-4 weeks for document preparation if approved.
• Partial Release of Collateral:  2-3 business days for initial review, 2 weeks for document preparation if approved.
• Hardship Accommodations:  1-2 business days for initial review, 3-5 days for document preparation if approved.
• Refund/Payoff Requests:  1-2 business days for processing.
• Verification of Mortgage:  1-2 business days for processing.

What are some common errors found by SBA which extend the above noted timelines?

• Forms not filled out properly
• Missing forms and/or supporting documents, with the full application not submitted for review
• Signatures not provided as requested
• Errors in the original EIDL loan application
• Ownership has changed since the original application and was not approved by SBA
  
  

Additional Helpful Facts on EIDL Loans:

• 30 months deferment on payments from date on original note – interest continued to accrue during that time.
• Deferments began rolling off in October 2022
• EIDL loans cannot be forgiven
• MySBA Loan Portal was released for SBA borrowers on 2/21/23 – can view loan details, make loan payments, and access statements for COVID-19 EIDL, Disaster or SBA-serviced 7(a) loans.
  
  

The takeaway? Don’t assume that a servicing action will be approved without the potential request for a paydown or payoff and start the servicing request for an EIDL loan early in the process. They take time and require attention to detail for a smooth process for both you as the lender and your borrowers.