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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.

$383,000 SBA 7A LOAN - NEGOTIATED RELEASE OF LIEN FOR CONSIDERATION

$383,000 SBA 7A LOAN - NEGOTIATED RELEASE OF LIEN FOR CONSIDERATION

Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate  and collect all pledged collateral pursuant to the trust deed instruments.

The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery  to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.

After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.

$298,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$298,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA.  Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice.  Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt.  After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.

$1,500,000 SBA COVID-EIDL LOAN - SBA OHA LITIGATION

$1,500,000 SBA COVID-EIDL LOAN - SBA OHA LITIGATION

Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency.  After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.

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