A Simple Guide to SBA Loans
Are you interested in taking out an SBA loan? Here's everything you need to know about taking out and repaying SBA loans.
If your small business took out a COVID-19 Economic Injury Disaster Loan (EIDL), you’re likely aware of the challenges that come with repayment. Between rising interest rates, shifting congressional policy, and the lingering impact of the pandemic, many small businesses are unsure where to turn. In this article, we’ll break down the latest updates on SBA COVID-19 EIDL loans, including repayment challenges, potential congressional relief, and what you need to know about the new Complete COVID Collections Act. We’ll also share tips on the best way to protect your business and your personal assets.
The Small Business Administration (SBA) launched the COVID-19 EIDL program to provide critical financial relief to small businesses grappling with pandemic-related economic challenges. Over 3.9 million loans were approved, totaling more than $400 billion.
For many businesses, the COVID-19 EIDL proved a lifeline at the height of the pandemic. However, with 30-month deferments expiring and the economy still rebounding, repayment has become a challenge.
Accrued Interest & Deferment Periods
While loan payments were deferred for 30 months, interest continued to accrue. This means many borrowers now face larger balances than they initially realized.
Small Business Struggles
According to various reports, only around 36% of small businesses have fully returned to pre-pandemic sales levels. With ongoing revenue challenges, many business owners find it difficult to keep up with monthly EIDL payments.
Rising Charge-Offs
The SBA reported $18.6 billion in charge-offs from its COVID-EIDL program for fiscal year 2024, which is about 6.5% of the active portfolio. Although this is down from $52 billion in fiscal 2023, it’s still significantly higher than the charge-off rates for other SBA programs, such as 7(a) and 504 loans.
Although there is no guarantee, members of Congress have floated several ideas to help struggling borrowers:
A newly introduced bill known as the Complete COVID Collections Act is set to impact the way COVID-19 small business loans are handled. Here are some highlights:
What This Means for Borrowers
With stricter oversight and no suspension of collections, borrowers should be prepared for more aggressive loan collection efforts. If your SBA EIDL loan is delinquent, you could see faster referrals to the Treasury’s Bureau of Fiscal Service—which can lead to wage garnishments, tax refund offsets, and other collection actions.
Proponents
Opponents
If your business is struggling with SBA COVID EIDL debt, ignoring the situation can escalate the problem. Delinquencies can lead to:
Step 1: Schedule a Case Evaluation
Contact an experienced attorney authorized to practice under 5 U.S.C. § 500(b) who specializes in SBA COVID EIDL matters. A professional can assess your specific circumstances and recommend the best path forward.
Step 2: Assess Your Options
Whether it’s Offer in Compromise, Repayment Negotiation, appealing an SBA decision, or exploring new legislation, understanding your full range of options is critical.
Step 3: Let a Legal Team Advocate on Your Behalf
From filing appeals to negotiating settlements, legal experts can guide you through the complexities of the SBA COVID EIDL process and help protect your assets.
The SBA COVID-19 EIDL program was designed to be a lifeline, but its aftermath has placed many business owners in challenging financial positions. With the potential for new relief measures—and the likely passing of the Complete COVID Collections Act into federal law—it’s vital to stay informed and proactive.
If you’re feeling the pressure of repayment or have already received the SBA's Official 60-Day Due Process Notice, time is of the essence. The longer you wait, the fewer options you may have to rectify your situation.
Protect Law Group can help you understand your rights, evaluate your options, and advocate on your behalf. If you’re facing SBA COVID EIDL default or are concerned about new legislative actions, Contact Us Today to schedule a consultation. Stay ahead of the game—and safeguard your future.
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.
The client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. The client received the SBA's Official 60-day notice with the debt scheduled for referral to the Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-day notice, and prevent enforced collection by the Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.
Clients personally guaranteed an SBA 504 loan balance of $337,000. The Third Party Lender had obtained a Judgment against the clients. We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.
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.
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