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SBA Has Stopped Auto-Enrollment In The Hardship Accommodation Plan for COVID EIDL Loans

SBA COVID EIDL Loan Default? Learn about HAP, OIC, Workout or Bankruptcy

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SBA Has Stopped Auto-Enrollment In The Hardship Accommodation Plan for COVID EIDL Loans

As of March 19,2025, the Small Business Administration (SBA) discontinued its automatic enrollment option for the Hardship Accommodation Plan (HAP) affecting COVID EIDL loans. This sudden change applies both to borrowers with disbursements below $200,000—who had previously been able to self-enroll—and those seeking new or renewed hardship status on larger loans. Many businesses relied on the HAP to temporarily lower their monthly payments, but they will now face a more demanding repayment environment.

Key Developments

1. Termination of Automatic HAP Enrollment

     
  • The one-click enrollment feature contained in the My SBA Loan Portal that allowed COVID-EIDL borrowers with disbursement amounts of $200,000 or less to reduce their monthly payments to as little as 10% of the regular amount up to 2 and ½ years (30 months) is no longer available.
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  • Borrowers with existing hardship accommodation can continue their reduced payments until their current term expires, but automatic renewal is not an option unless future policies reverse the ban.

2. Shift in Policy under a New Administration

     
  • The new administration, led by Trump-appointed SBA Administrator Kelly Loeffler, has adopted stricter approaches to debt repayment for the SBA COVID EIDL loan portfolio.
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  • Rather than continuing to “kick the can down the road” with repeated short-term reductions, the SBA appears focused on distinguishing which borrowers can realistically repay and which are likely to default.

3. Possible Outcomes for Borrowers

     
  • Higher Payments: Borrowers could see monthly payments rise sooner, leading many to reassess their budgets, seek alternative financing or default.
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  • Accrued Interest: Delaying full payments can mean more interest piling up, ultimately increasing the total amount owed, including the likelihood of default.
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  • Program Uncertainty: If EIDL loan servicing is sold to third party debt buyers, those private entities may be even less flexible in granting payment relief.

4. Potential Next Steps & Strategies

     
  • More Flexible Offers in Compromise (OIC): The SBA may begin considering more serious settlement discussions for borrowers and guarantors whose businesses have permanently closed or cannot sustain full repayments.
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  • Aggressive Collection Actions: Borrowers who default—especially those with large loans or pledged real  estate—could face referral to the U.S. Treasury or litigation.
  • Allowing Defaults: The agency may simply let defaults take their course without offering continued hardship extensions, especially where repayment is deemed unfeasible.

5. Stay Informed

     
  • Official details about how the SBA will handle future defaults, settlement requests, or enforcement measures  remain limited.
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  • Borrowers should closely follow new SBA announcements and assess their repayment strategies. In the near term, businesses may wish to explore all financing options, consult with legal professionals, and be prepared for aggressive collection activity.

Source: https://www.sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan/manage-your-eidl#options-for-borrowers-facing-financial-hardship

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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$50,000 SBA 7A LOAN - RESPONSE TO SBA OFFICIAL 60-DAY NOTICE

$50,000 SBA 7A LOAN - RESPONSE TO SBA OFFICIAL 60-DAY NOTICE

Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001.  The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.

Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice.  The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan.  Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt.  A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments.  As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.

$488,000 SBA 7A LOAN - SBA OHA LITIGATION

$488,000 SBA 7A LOAN - SBA OHA LITIGATION

The clients are personally guaranteed an SBA 7(a) loan.  The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients.  We initially filed a Cross-Servicing Dispute, which was denied.  As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services.  Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

Client’s small business obtained an SBA 7(a) loan for $750,000.  She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance.  The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance.  However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.

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