To clarify who repays what:

" "Do the 2 remaining shareholders intend to repay it?" "I would assume that's their intention."

The entity took an SBA loan, but not for the business to operate. The shareholders are now using that money personally. Of course, the entity will repay the loan to SBA. No one pays taxes on a loan; it's the disposition of the proceeds that matter. The shareholders either repay the loan to the entity (like a wrap around mortgage) or the payments made to SBA on their behalf are distributions to them (man, this gets ugly) as a loan offset. Is everything 50/50?