Hi there! My name is Jason. I am the founder of Distressed Loan Advisors. I help people with SBA loan situations where they’re struggling to make payments where their businesses have closed.
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Today is an EIDL loan forgiveness update.
As we saw last week in my prior videos, the SBA has reversed course on what they’re going to do with defaulted EIDL loans for $100,000 or less.
Just to recap, in case you haven’t seen my prior videos, basically the SBA originally said they would not refer EIDL loans that were in default to the Treasury for Collection, citing the fact that it would cost more to pursue them than they would likely recover.
This stance was challenged by the Inspector General. This is a group that oversees waste, fraud and abuse in the government and they basically said ” Hey SBA, you don’t know that for sure!”
And the SBA agreed to, I guess, run some sort of analysis. And as of last week, they reversed course.
And so then the SBA announced that all loans, regardless of size, including loans $100K or less, that were given through the EIDL program during covid.
Those loans are now gonna be referred to treasury for collection, just like every other type of loan.
So just to clarify, whoever thought that loans under $100K were being forgiven, that was never the case. What was the case is the SBA didn’t intend to pursue them.
I tended to agree with that approach because you know, any loan that was given through some sort of legal entity like an LLC and S Corp, a C Corp loans under $200,000 did not require personal guarantees. So if you borrowed $100k or less through an entity, there’s no personal guarantee.
Without a PG, recourse for the SBA would be very, very limited. And so the fact that they’ve reversed course, it really, in my eyes, only impacts those who are sole proprietors because then they actually can go after your personal assets.
For everybody else that borrowed through a legal entity, if your business closes and it no longer has any assets, there’s really not a huge concern with the SBA going after the business ’cause there’s nothing for them to get.
Nonetheless today’s update is that they announced there is a 60 day grace period period for loans under $100K that are delinquent. And that’s both for PPP and EIDL. I don’t talk much about PPP ’cause I don’t get many inquiries about it. So really my focus here is EIDL.
So as far as this SBA announcement, they’re essentially saying if you’re in default and you’re original EIDL was $100K or less, your loan previously was not being referred and they’re gonna give you 60 days.
This is your notice that you need to bring this current by March 3rd, 2024. And if it’s not brought current by then, they will refer it over to the treasury, depending, I suppose, on how delinquent it is.
The article is actually pretty amusing because they’re doing their best to argue why you should make the payments on these, and completely sort of glossing over the fact that most of these don’t have any personal guarantees.
But nonetheless, they go on to say, “small business borrowers in delinquency or default who take action and obtain good standing with the SBA will improve their long-term financial health substantially. The benefits of getting and staying current on SBA loans include better credit scores (Jason comment: only if there’s a personal guarantee) which will make it cheaper and easier to buy a home or a car in the future.” So for most people, not really relevant.
And then they say eligible for future government and financial assistance like VA loans or help after a natural disaster. Whether or not they’ll do that if you personally guaranteed versus not, they don’t really clarify. So we don’t know if that’s even an issue in the future.
And then they say, and in some cases, avoidance of federal and private collection activities, which can include withholding tax returns, a wage garment, well that’s, yeah, if you’re personally guaranteeing it, it goes to the treasury. That’s a possibility.
So that’s the update.
So if you have a loan for $100K or less, and you haven’t been making payments ’cause you didn’t think you needed to, this is your amnesty period. You have until March 3rd, 2024 to bring it current.
If you bring it current, if you can’t afford your regular payment, you can apply for a hardship accommodation.
Keep in mind that hardship accommodations are only available to loans that are current, which would mean if you’re behind on payments, you would need to bring a current and then you can apply for the hardship accommodation.
And because it’s under $200,000, you can actually do it right in the SBA loan portal. So it’s super convenient. You just go and you click a button. But you do need to bring a current, so if you make a payment to bring a current
I would suggest that you send an email to the email address, CESC@sba.gov, and let them know that the law has been brought current so that they can go back into the system in case it’s been shown as a charge off or in liquidation or something like that.
So that’s the update. I’m sure I’ll get tons of calls from people after March 3rd saying, “I didn’t realize it! I waited too long, it’s my fault!:
So this is me yelling from the rooftops. Be proactive about this. If you don’t want your loan to go to the treasury, you need to bring it current before March 3rd, 2024. Otherwise it does risk going to the treasury.
And then, the conversation that you and I will have will be very different. ’cause Once it’s at the treasury it’s a whole different set of rules.
So that’s it, that’s the update. If you wanna schedule time with me, here is a link to schedule a case evaluation.
