AmiSight 9/4: The Hidden Strings on Your EIDL Loan

During the pandemic, millions of small businesses turned to the Small Business Administration's Economic Injury Disaster Loan (EIDL) program to stay afloat. For many, those loans were a lifeline. But like all loans, they came with strings attached—strings that many entrepreneurs have since forgotten.

One of those strings is this: If you still have an EIDL loan outstanding, you can't sell equity in your company without the SBA's permission.

At first glance, that may not sound like a big deal. After all, when you raise capital from investors, the deal will most likely close without anyone flagging it. The SBA isn't hovering over your shoulder. But the problem doesn't vanish—it just gets deferred. It can resurface years later, during an audit or when you go back to the SBA for another loan, and suddenly the agency sees that your changed ownership structure violates the terms of your original EIDL.

Just last week, I spoke with an entrepreneur who learned this lesson the hard way. I unpack the full story in my 21 Hats column.

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