Get Answers About Debt Relief For Your COVID Business Loans
As a small business owner who took out Small Business Administration Economic Injury Disaster Loans (SBA EIDL), you’ve been waiting for more information about your loans’ status, especially if you haven’t been able to pay them back.
The pandemic was a difficult time for your businesses, and we understand that you may still be trying to claw your way back to financial health. Understandably, you are curious about SBA EIDL loan forgiveness, whether a new presidential administration coming into office will affect these loans, and whether other options exist to get debt relief.
Here’s what you should know about SBA EIDL loans and what you can do to take action now.
Is There SBA EIDL Loan Forgiveness?
The U.S. Small Business Administration says, “These loans are not forgivable and must be repaid.” However, those requirements vary, depending on the size of the loan you took out from the SBA.
These requirements offer a hint at what is possible to discharge your loan. Loans over $200,000 had to be personally guaranteed. This opens up an opportunity for debt relief.
- Dissolve your business and file for personal bankruptcy: If you have an SBA loan for more than $200,000, and you decide you no longer wish to operate your business as an LLC, you can dissolve your business and file for personal bankruptcy, as these loans were personally guaranteed. Your SBA EIDL loan can be discharged in bankruptcy, and you can consider operating your business as a sole proprietorship, keeping up to $60,000 in business assets (known as “tools of the trade”) that will help you continue business operations.
- Liquidate your LLC or find potentially better loan terms: For loans between $25,000 and $200,000, which are not personally guaranteed, you can choose to liquidate your business completely to pay off this loan. You can also work with a lawyer for debt consolidation, settlement, and bankruptcy, who may be able to help you find better loan terms in Subchapter 5 small business bankruptcy.
The key strategy here is to find a trusted lawyer who understands small business debt and has been tracking SBA EIDL loan updates since the beginning of the pandemic. With legal knowledge from a debt relief attorney on your side, you have a far better chance of finding a solution for your difficulties.
What Can I Do to Prepare For a Meeting With a Small Business Debt Relief Lawyer?
To get a head start on working with an SBA EIDL attorney, log in to the MySBA Loan Portal to find out the status of your loan. Previously the Capital Access Financial System (CAFS) was managing these loans, but now your loan information is available through a new portal, dedicated to SBA loans like EIDL and the Paycheck Protection Program (PPP).
Are There Debt Relief Deferments For SBA EIDL Loans?
Yes, but these deferments have expired. For loans that were taken out in 2020, 2021, and 2022, businesses were given 30-month deferments for their SBA EIDL Loans. However, in February 2024, the SBA announced that they would provide more relief for borrowers: the Hardship Accommodation Plan (HAP).
What Is the Hardship Accommodation Plan (HAP)?
The HAP program, which is dedicated to supporting COVID-19 EIDL borrowers, provides some debt relief for small businesses that have had trouble repaying these loans.
HAP Terms
- Within 60 days of your loan coming due after deferment, you can apply for a 10% reduction on your payments at a minimum payment of $25 for up to six months.
- If you make these payments on time, you are eligible to reapply for additional reductions, but with greater percentages of your monthly payment due each time.
- Interest continues to accrue on these loans, even after HAP enrollment.
If you have 10% to put down now, but you’re worried about your financial situation in general over the coming months, you may end up defaulting on your loan during this payment plan. You may be better served with a more cost-effective solution, which you can develop with an SBA EIDL attorney.
Learn more about the Hardship Accommodate Plan.
Will a New Presidential Administration Be More Lenient On Debt Relief For SBA EIDL Loans?
This seems unlikely, given what has happened with student loans in Congress over the past few years. The Biden Administration, which comes to an end in January 2025, has faced injunctions from U.S. District judges and resistance from Republican lawmakers in Congress to block “mass cancellation” actions that were proposed under this administration.
As Republicans are poised to take the majority of seats in Congress under a new presidential administration, it seems unlikely SBA EIDL loan forgiveness will gain traction, particularly when HAP offers a form of debt relief.
How Do I Find an SBA EIDL Attorney For Small Business Debt Relief?
Your best bet is to find a bankruptcy, debt settlement, and debt consolidation lawyer who understands how to help you with these loans. Look for a law firm that has been reporting on SBA EIDL loans all along.
You can do some research on their website. Has this team been reporting on effective legal strategies for dealing with SBA EIDL loans? Have they been looking into opportunities for SBA EIDL forgiveness? If so, this firm is likely on top of the latest SBA EIDL updates and has solutions to help small businesses.
You should also consider firms with a small business debt expertise. Solutions for your SBA EIDL loans aren’t too different from other financial difficulties that small businesses experience, so a debt relief attorney with a high level of knowledge about helping out business owners is likely a key benefit you’ll want to take advantage of.
It can be tricky to understand all the portals, logins, fine print, and government updates that come with taking out an SBA EIDL loan. Having a lawyer on your side to help you through this process can lead you to a new path forward.