EIDL loan - Recourse or Non-Recourse

How are 1065 preparers handling the EIDL loans on the K1s? Recourse or non-recourse? I understand that PPP is non-recourse but I am unsure about EIDL. Just thinking about it from at-risk basis perspective, any information or sources would be greatly appreciated.

PPP is non-recourse as I understand.

If the SBA files an UCC statement against the business assets (collateral) I think in that case it would be considered recourse. Thoughts?

Recourse to the business doesn't necessarily mean recourse to the owners.

If it's an LLC, it's nonrecourse unless one or more owners have signed a personal guarantee....need to examine the loan docs.

Recourse to the business doesn't necessarily mean recourse to the owners.

If it's an LLC, it's nonrecourse unless one or more owners have signed a personal guarantee....need to examine the loan docs.

Sorry, forgot to mention the partner level liability, and yes this is an LLC taxed as a partnership.

See SBA FQA's link below from 4/27/2021
https://www.sba.gov/sites/default/files ... AL-508.pdf

Basically

Recourse to owners if greater than $200K Loan, as they will have to sign guarantees.
Recourse to entity if greater than $25K loan, as they will have to offer their assets as collateral

Hope that helps.

The question has already been answered, but here's why: for a partner to have recourse debt on their K1, for example, that owner has to have an economic risk of loss as a result of the debt. If formed as a partnership and not an LLC, this automatically holds true since general partners typically have unlimited liability. An LLC taxed as partnership would require personal guarantee or (and very stupidly in an LLC) a deficit restoration obligation, which could result in members having unlimited liability in absence of personal guarantees in same manner as a general partnership (I have seen some stupid lawyers put these into LLC agreements without realizing the disaster scenario they just created).

From my trusty Parker Publishing, and I am pretty positive it is correct to say this applies to general partnerships from a LEGAL standpoint, but not an LLC taxed as a partnership unless that personal guarantee exists:

Reg. Sec. 1.752-2(b)(1) generally provides that, for purposes of determining whether a liability is a recourse liability, a partner bears the economic risk of loss for a partnership liability to the extent that, if the partnership constructively liquidated, the partner or related person would be obligated to make a payment to any person (or a contribution to the partnership) because that liability becomes due and payable and the partner or related person would not be entitled to reimbursement from another partner or person that is a related person to another partner.

Great explanation!