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SBA COVID-19 EIDL Financial Relief: What Small Businesses Need to Know Now

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SBA COVID-19 EIDL Financial Relief: What Small Businesses Need to Know Now

SBA COVID-19 EIDL Financial Relief: What Small Businesses Need to Know Now

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.

US President-elect Donald Trump picks former Senator Kelly Loeffler to head Small Business Administration

Background on the SBA COVID-19 EIDL Program

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.

  • Loan Purpose: Cover operating expenses like payroll, rent, and other fixed debts.
  • Maximum  Loan Amount: Up to $2 million (though caps varied over time).
  • Interest Rates: 3.75% for small businesses, 2.75% for nonprofit organizations.
  • Repayment Terms: Up to 30 years.
  • Grants and Advances: Emergency grants up to $10,000 and Targeted EIDL Advance payments for businesses in low-income areas.

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.

SBA COVID-19 EIDL Repayment Challenges and Default Rates

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.

Potential SBA COVID-19 EIDL Financial Relief Options Under Consideration

Although there is no guarantee, members of Congress have floated several ideas to help struggling borrowers:

  1. Loan  Forgiveness
       
    • Could be partial or full, similar to relief measures seen in the Paycheck Protection Program (PPP).
    •  
    • Would require congressional approval and could face strong opposition due to taxpayer costs.
  2.  
  3. Loan Deferment Extensions
       
    • Allows businesses additional time to recover before making payments.
    •  
    • Only delays payments—it does not reduce the overall debt.
  4.  
  5. Reduced Interest Rates
       
    • Could retroactively or prospectively lower the interest burden on existing loans.
    •  
    • Would lessen the financial strain but also reduce revenue that helps sustain future SBA loan programs.
  6.  
  7. Grant Assistance
       
    • Similar to PPP, direct grants require no repayment.
    •  
    • Would need substantial Congressional appropriations

The Complete COVID Collections Act: Key Takeaways

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:

  • No Suspension of Collections: The bill prohibits the suspension of collections on specific loans guaranteed under the Small Business Act due to the COVID-19 pandemic.
  • Referral of Claims: Loans under $200,000 must be referred to the Department of the Treasury for collection action if delinquent.
  • Monthly Congressional Updates: The SBA Administrator must provide monthly briefings to Congress on the progress of loan collections.
  • Fraud Enforcement: Establishes a 10-year statute of limitations for criminal or civil actions related to fraud in COVID-19 relief programs.
  • Data Transparency: The Pandemic Response Accountability Committee is required to maintain real-time data on recovered federal funds from COVID-19 relief

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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.

Arguments For and Against Additional Relief

Proponents

  • Ongoing Economic Stress: Many businesses still haven’t recovered and are at risk of default.
  • Prevention of Widespread Defaults: Loan forgiveness or extended deferments could stabilize struggling sectors.
  • Boost to Economic Recovery: Keeping businesses afloat promotes jobs and local economic growth.

Opponents

  • Moral Hazard: Concern that repeated bailouts set a precedent for future programs.
  • Taxpayer and Budget Costs: Funding relief programs may increase government debt.
  • Fairness: Businesses that managed to repay may feel penalized compared to those that receive relief.

How Businesses Can Prepare

  1. Monitor Congressional Updates
        Stay informed about new legislation and potential relief packages. Policy changes can happen fast, and missing an update could mean losing out on crucial financial benefits.
  2. Evaluate Your Financial Position
        Conduct a thorough cash flow analysis to see if you need a deferment or if you qualify for other repayment accommodations.
  3. Consider  Refinancing or Repayment Plans
        Contact the SBA or a legal professional experienced in SBA debt settlement to discuss flexible repayment plans or loan modifications.
  4. Seek Professional Advice
        If you’ve received an Official 60-Day Due Process Notice or are delinquent for more than 120 days, it’s essential to act quickly. Legal counsel can help you negotiate a settlement, respond to official notices, or—if necessary—represent your interests before the SBA Office  of Hearings & Appeals Court (OHA).

Why Timely Action Is Critical

If your business is struggling with SBA COVID EIDL debt, ignoring the situation can escalate the problem. Delinquencies can lead to:

  • Collection Referrals: Unpaid SBA COVID EIDL balances sent to the Treasury, Private Collection Agency (PCA) or the Department of Justice (DoJ) for enforced collection efforts.
  • Credit Damage: Personal and business credit scores can be severely impacted, affecting future financing.
  • Legal  Risks: In cases involving alleged fraud or misrepresentation, the statute of limitations for civil or criminal actions can extend up to 10 years under the new provisions.
What Happens When You Get Served Papers for Debt?

Protect Your Business and Personal Assets

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.

Moving Forward

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.

Need Help Navigating SBA COVID EIDL Debt?

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.

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.

$430,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$430,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral.  One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

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.

$300,000 SBA 7A LOAN - SBA OIC TERM SETTLEMENT

$300,000 SBA 7A LOAN - SBA OIC TERM SETTLEMENT

Clients personally guaranteed SBA 7(a) loan balance of over $300,000.  Clients also pledged their homes as additional collateral.  SBA OIC accepted $87,000 with the full lien release against the home.

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