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.
COVID-19 Relief Fraud: PPP & EIDL Loans Under Heightened Investigation & Prosecution Contact us today.
Book a Consultation CallDerrick Worrell, 48, pleaded guilty to charges of money laundering and organizing a scheme to defraud $50,000 or more in connection with certain SBA COVID Loans authorized for disbursement under the CARES Act.
Mr. Worrell was imposed a mitigated sentence of 10 years, which could be reduced to under 6 years if Worrell complies with the terms of his plea agreement. To qualify for the reduced sentence, Worrell has been ordered to turn himself in to the court to avoid any further legal violations.
Worrell was among 6 individuals arrested for allegedly stealing over $3 million from the SBA COVID-19 Loan Program, enacted in 2020 under the CARES Act – which was designed to provide economic relief to small businesses actually affected by the COVID-19 pandemic.
During the course of investigation, it was discovered that Worrell secured an SBA COVID Loan disbursed in the amount of $491,000 for his company with 26 employees and a monthly payroll of $184,000. Worrell also paid $52,000 in wages, taxes and payroll fees while using the remainder of the SBA COVID Loan for his own personal expenses - approximately $254,000 or 52% of the loan, which included rental cars, groceries, and online shopping – all of which were apparently flagged as misuse of COVID relief funds.
Understand Your Risk
This case serves as a reminder of the severe consequences of exploiting the COVID PPP & EIDL Loan Program.
With the recent uptick by the SBA of conducting COVID PPP & EIDL non-compliance audits and business closure reviews where borrowers are required to produce financial statements, tax returns, bank and credit card statements in response to an Information Document Request, there is a paper trail and treasure trove of information that could be used against you and land you in trouble if allegations of ineligibility, false certification and/or misuse of proceeds can be proven.
If you obtained COVID PPP or EIDL funds for your small business and think you could find yourself in the crosshairs of an investigation and potential prosecution of false certification, misuse of proceeds or other financial mischief, then you should consult with qualified legal counsel to help assess your situation.
Government authorities have been encouraging the public to report suspicious activity related to pandemic relief funds, and with the extended 10-year statute of limitations to investigate COVID PPP & EIDL Loan fraud, there is ample time for enhanced scrutiny and possible prosecution ranging from civil penalties to criminal allegations.
Establishing a robust compliance strategy is crucial in preparing for an SBA non-compliance audits or business closure reviews. Begin by reviewing your business practices against SBA guidelines to pinpoint any potential areas of non-compliance. Regular internal audits can help you identify and rectify discrepancies before they become problematic. Furthermore, consulting with professionals specializing in SBA loans can provide insights into maintaining compliant financial records. Remember, being proactive in compliance can significantly mitigate risks during an audit or investigation.
Strategies
Engaging legal counsel experienced in SBA regulations should be a priority if faced with an SBA non-compliance audits or business closure reviews. An attorney can help you navigate the complexities of the non-compliance audit or business closure review process, advise on your legal rights, and represent your interests. They can also assist in developing a strategy for responding to inquiries and defending against potential findings of non-compliance. Moreover, if the non-compliance audits or business closure reviews reveal significant issues, your attorney can guide you through the steps for pursuing options.
Navigating an SBA non-compliance audit or business closure review doesn't have to be an overwhelming ordeal. By understanding the process, prioritizing compliance, enlisting legal support, and taking action post-audit, you can mitigate the impacts of such scrutiny on your business or you - as a owner/officer. If you're facing an SBA audit or have concerns about your business's compliance with SBA regulations, contact Protect Law Group today. Our team is dedicated to guiding small business owners through financial challenges and ensuring their rights are protected.
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
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
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.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
Our firm successfully facilitated the SBA settlement of a COVID-19 Economic Injury Disaster Loan (EIDL) f borrower received an SBA disaster loan of $150,000, but due to the severe economic impact of the COVID-19 pandemic, the business was unable to recover.
Despite the borrower’s efforts to maintain operations, shutdowns and restrictions significantly reduced the customer base and revenue, making continued operations unsustainable. After a thorough business closure review, we negotiated with the SBA, securing a resolution where the borrower paid only $6,015 to release the collateral, with no further financial liability for the owner/officer.
This case demonstrates how businesses affected by the pandemic can navigate SBA loan settlements effectively. If your business is struggling with an SBA EIDL loan, we specialize in SBA Offer in Compromise (SBA OIC) solutions to help close outstanding debts while minimizing financial burden.
Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
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