When and if you withdraw, the loan will be defaulted (deducted from balance)
You can do a roll over into two accounts, they will cut one check to the IRA and one to the new plan.
Any amount that is made out to you personally, and the defaulted loan amount will be taxed and penalized if you are under 59 1/2.
They have to withhold 20% for federal income tax on the loan amount, and any amount you withdraw.. the penalty is 10% additional, usually paid when you file your taxes.
So if you roll the remainder, only the loan would be taxed. .
Loan is 2206.50- 20% of that is 441.30
So your balance as of the above figures would be reduced to approximately, 19823.92
There may also be a distribution fee.. *usually around $50..
if the remainder is rolled , it will not be taxed...these balances change daily.. so best bet is to talk to the administrator of the plan, to see what they will allow..
Is the old plan terminating? I would assume so, as that would allow you to withdraw.

Yes, our company was sold and it went through today. So I would not be paying any taxes out of my pocket, it will be automatically withdrawn from my 401K when I move it over to an IRA?

Darlemull - will I also be able to take out another loan? If I take out 3,000 and add that to the $2,206.50, totaling $5,206.50, the tax would be $1,041.30. My remaining balance would be $16,223. I will not have to pay any additional taxes, come tax time, and nothing out of pocket. Correct?

Yes they MUST withhold 20% federal withholding from any payment made to you or defaulted loan.. right out of the balance.. the penalty however, it is applies to you will be assessed when you file next year.. be prepared for another 10% if it will effect you..
When you close a 401k, you will not have to pay anything out of pocket at the time.

Thank you. So i can take another loan out, but will have to possibly pay 10% penalty on both of my loans How do I know if I have to pay the 10% or not? Are there criteria?

Basically age is the criteria...
If you are under 59 1/2 .. expect to pay the extra 10%... anything under that age is considered early withdrawal, (the defaulted loan is considered a withdrawal) and subject to that penalty.