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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.

$391,000 SBA COVID EIDL - CROSS-SERVICING DISPUTE | NEGOTIATED REINSTATEMENT & WORKOUT

$391,000 SBA COVID EIDL - CROSS-SERVICING DISPUTE | NEGOTIATED REINSTATEMENT & WORKOUT

Client's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement.  The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.  

The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.

The Firm was hired to investigate and find an alternate solution to the bankruptcy option.  After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.

$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.

$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.

Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.

The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.

The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.

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