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.

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Related reading

• EIDL Offer in Compromise: SBA Settlement Challenges
• EIDL Loan Forgiveness in 2026: What to Know