Bank Payoff Hurdle Eliminated for EIDL Borrowers

An unexpected consequence of COVID’s effect on businesses this past year has been the challenge imposed on small, independent finance companies to bring on new deals. First there was PPP money which shored up companies’ balance sheets leading banks to keep struggling companies on their books longer instead of exiting them. When banks finally did start pulling the plug, in many cases, companies had deteriorated further such that it’s been more difficult to get banks out in full.

Then Economic Injury Disaster Loans (EIDL) came along acting as yet another impediment for small lenders. With an EIDL, the SBA takes a blanket lien on the borrower’s assets. Borrowers are precluded from taking advances from any other lender, whether senior to the SBA or not, and if they do, the SBA could hold them in default. As such, up until recently, Celtic Capital’s position was to pay off EIDL. On smaller deals, the challenge has been one of availability and once again, the ability to pay the bank off.

We have since learned that subordination of an EIDL is now an option. The SBA has been responsive to subordination requests – a boon to borrowers and lenders alike. For borrowers who don’t want to (or can’t) pay off its EIDL, subordination enables them to keep cheap(er) money and to borrow additional needed funds. And with a subordination in place, a hurdle to pay off the bank is removed.

Celtic Capital is fully-versed in the subordination process and is working successfully with borrowers and bankers to subordinate EIDL. Bankers no longer need to hang on to borrowers they would otherwise exit for fear of taking a haircut.

About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.

As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.

If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or, or visit us at