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Current SBA Guidelines on EIDL Loan Settlements

Struggling with a COVID EIDL loan? Learn how the SBA's Offer in Compromise works in 2025, eligibility rules, and settlement options before policies change.

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Current SBA Guidelines on EIDL Loan Settlements

Current SBA Guidelines on EIDL Loan Settlements

The SBA has strict policies when reviewing Offers in Compromise for SBA loans, and COVID EIDL loans are no exception. Based on current guidance:

  1. The SBA Prioritizes Collection Before Settlements
    • If the loan is still with the SBA (not referred to the U.S. Treasury or collections), a settlement may be possible.
    • If the loan has defaulted and been transferred to the Treasury, settlement options become much more difficult.
    • The SBA generally requires borrowers to liquidate assets before considering an OIC.
  2. The Amount of the Offer Matters
    • The SBA does not accept "pennies on the dollar" settlements.
    • They will evaluate your personal finances, assets, and ability to pay when considering an offer.
  3. There Are No Automatic Discharges
    • Unlike PPP loan forgiveness, COVID EIDL loans are not automatically forgiven and must be repaid unless settled through an approved Offer in Compromise.
  4. SBA Policies Are Subject to Change
    • The SBA may modify its OIC policies in the future based on economic conditions and legislative changes.

Steps to Submit an Offer in Compromise for a COVID EIDL Loan

If you believe you qualify for a COVID EIDL settlement, here’s how to proceed:

Step 1: Go Through Business Closure Review

  • If your loan is still with the SBA, you can work directly with them to explore settlement options.
  • Your business must be closed.
  • You will have to account for and sell all remaining business assets with proceeds going to the SBA
  • The SBA must be satisfied that no business assets were distributed to shareholders
  • Once the Business Closure Review is concluded, you will referred to an OIC loan specialist

Step 2: Gather Financial Documentation

The SBA will require:

  • Personal financial statements (SBA Form 770)
  • Bank statements and tax returns
  • Proof of business closure (if applicable)

Step 3: Submit an Offer

  • You must propose a realistic settlement amount based on your financial ability to pay.
  • The SBA will evaluate your assets, liabilities, and income before accepting any offer.

Step 4: Negotiate with the SBA

  • The SBA may counteroffer or reject your proposal if they believe you can pay more.
  • If an agreement is reached, the settlement must be paid as a lump sum—installment payments are typically not accepted.

What Happens If Your Offer in Compromise Is Rejected?

If the SBA rejects your OIC, you may still have options:

  • Appeal the Decision: If you can provide additional documentation proving financial hardship, you can request reconsideration.
  • Explore Treasury Settlement Options: If your loan has moved to the U.S. Treasury, a different settlement process may apply.
  • Seek Legal or Professional Guidance: An SBA debt attorney or settlement expert can help navigate the process.

Key Takeaways on SBA Offers in Compromise for COVID EIDLs

  1. As of 2025, the SBA has not announced a specific Offer in Compromise program for COVID EIDLs, but settlements may still be possible under existing SBA guidelines.
  2. Only personally guaranteed loans (over $200,000) are typically eligible for settlement.
  3. The SBA’s collection process prioritizes recovering the full loan balance before considering settlements.
  4. Offers must be reasonable and based on the borrower’s financial capacity.
  5. SBA policies can change at any time—borrowers should stay informed of any updates.

Need Help With Your SBA Offer in Compromise?

If you’re struggling with your COVID EIDL loan and are considering an Offer in Compromise, it’s essential to approach the process strategically. The SBA’s policies are complex, and settlements are not guaranteed.

Final Thoughts

The SBA’s stance on COVID EIDL loan settlements could change at any time. Business owners with unaffordable loan payments should act quickly to explore their options before their loans are transferred to collections. If you qualify for an Offer in Compromise, submitting a well-prepared application can increase your chances of a successful settlement.

For the most up-to-date information, continue checking official SBA guidance or consult a legal professional specializing in SBA debt relief.

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

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Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure

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Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements

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Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.

$154,000 SBA COVID-19 EIDL - AUDIT REPRESENTATION & RELEASE OF COLLATERAL

$154,000 SBA COVID-19 EIDL - AUDIT REPRESENTATION & RELEASE OF COLLATERAL

Our firm successfully assisted a client in closing an SBA Disaster Loan tied to a COVID-19 Economic Injury Disaster Loan (EIDL). The borrower obtained an EIDL loan of $153,800, but due to the prolonged economic impact of the COVID-19 pandemic, the business was unable to recover and ultimately closed.

As part of the business closure review and audit, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability for the owner/officer.

This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA Offer in Compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.

$505,000 SBA 7A LOAN - FEDERAL DISTRICT COURT LITIGATION (CALIFORNIA)

$505,000 SBA 7A LOAN - FEDERAL DISTRICT COURT LITIGATION (CALIFORNIA)

Clients borrowed and personally guaranteed an SBA 7(a) loan.  Clients defaulted on the SBA loan and were sued in federal district court for breach of contract.  The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan.  We were subsequently hired to intervene and aggressively defend the lawsuit.  After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

Client’s small business obtained an SBA 7(a) loan for $750,000.  She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance.  The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance.  However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.

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