The SBA DOES NOT ALLOW any small business borrower to pay down their principal on their EIDL Covid Loans. Not ever!   Which means as a small business we stay in debt for much much longer.  

 

Not being allowed to allocate funds to Principal Only is not described in the Payment Terms on the loan agreements we signed and although this is a "legal" lender scheme it certainly is not a reputable one.  Every legitimate lender allows borrowers to make their loan payments and an additional payment to Principal if they are able but not the SBA.gov!

Approximately 4 million EIDL Covid Loans were processed with interest accruing the moment the loan was disbursed.  Interest rates are at 3.75% for 30 years.  The government stands to earn just under $211 billion in interest alone and over $600 billion in total.

Immediate action is required by the SBA to change this policy and allow principal payments to be made.

Let's remember that the big companies received the PPP Loans.  10.5 million loans made, $800 billion dispersed.  98% Forgiven.  Zero interest earned.

The Loan Payment language is as follows;

PAYMENT TERMS: Borrower must make all payments at the place SBA designates. Borrower may prepay this Note in part or in full at any time, without notice or penalty. Borrower must pay principal and interest payments of $____ every month beginning Twelve (12) months from the date of the Note. SBA will apply each installment payment first to pay interest accrued to the day SBA receives the payment and will then apply any remaining balance to reduce principal. All remaining principal and accrued interest is due and payable Thirty (30) years from the date of the Note.

Here are images showing all of my 13 pre-payments being allocated to interest only with zero going towards the principal.  All of these payments were made 13 months before the loan was due to start being paid back and all of these payments were intended to lower our total principal.  The repayment terms say you will not be penalized for pre-payments but clearly you are.