You should always carefully read the loan documents before borrowing money for your business. This is doubly true when you borrow money from the government.

Case in point: the Small Business Administration’s (SBA Economic Injury Disaster Loan (EIDL) program.

The EIDL program provides loans of up to $150,000 to businesses in need of working capital due to the economic dislocation caused by the COVID-19 pandemic.1

Unlike Payroll Protection Program (PPP) loans, EIDLs are not forgivable—you have to pay them back. But for a commercial loan, they do come with low interest—3.75 percent—and a long 30-year repayment period. More than 3.3 million businesses have already obtained EIDLs from the SBA.

To obtain an EIDL, your business must sign

a loan authorization and agreement,

a note, and

a security agreement.

These documents contain some serious fine print that makes it clear the SBA really wants you to pay back the loan.

Some borrowers have expressed surprise at some of these loan provisions. But there’s nothing especially unusual about most of them—they are often required in some form or another in commercial loans.

But if you’ve never obtained a commercial loan, ... Log in to view full article.