Transcript for video (lightly edited):
Watch the Video here:
Hey guys, my name is Jason. I am the founder of Distress Loan Advisors. If you have questions about your SBA loan related to workout, offer in compromise, stuff like that, I do offer 30 minute case evaluations.
In the case of 7a loans – – business as usual. If your business closed and you want to try to settle, I can help with that. For EIDL loans, in case you missed it, they’re currently not considering reasonable settlement terms, so I can’t help with that. But I am fielding TONS of questions during these case evaluations about basically what happens if I don’t pay, what are they gonna do to me, what are my options?
I’ll put a link below where you can go to my website. I’ve got like almost a hundred videos at this point, mostly about EIDL.
I’ve got several hundred articles, maybe about a dozen, about EIDL and then the rest about regular SBA default offer and compromise, stuff like that.
Today I want to talk about, EIDL loans and the little fight that the Inspector General and the SBA are having. So the Inspector General is a part of the federal government and they’re tasked with overseeing fraud, waste and abuse.
So, they’re trying to look out for the taxpayer and so they’ve been having a little fight with the SBA since earlier this year where the SBA said, “we’re not gonna refer loans for a less than a hundred thousand dollars for collections for these EIDL loans, just like with PPP, because we don’t think the recovery is worth it.” And so some interesting facts came out.
But basically just to summarize this report, and here it is in case you wanna see it (I showed the report to the camera) I don’t know if it’s backwards, it might be sorry.
But basically, the SBA is like it’s not worth it. And the IG is like, how do you know? And so they had some consultants that they looked at, and it’s still unsettled.
So at this point, if you’ve got a loan for less than a hundred thousand, um, it doesn’t mean that they’re going to pursue you, but it also doesn’t mean they’re not going to. I think this is not yet settled, but that’s not the interesting part that I found.
So basically (wow, I say “basically” a lot) the IG is like making recommendations and then the SBA responses to ’em.
And so here’s an interesting point made by the SBA. So the question (from the IG) is “why are you not referring these to the treasury so we can collect on, some of these delinquent funds, whether or not they’re a hundred thousand, doesn’t matter. We want to get our money back.”
And the SBA cited the express program where between the years of 2009 and 2022, so 14 years, there were $23.5 million in express loans to sole proprietors that referred to the Treasury.
And over that period, guess how much the treasury collected? $65,000. That’s right. Out of 23 and a half million, the treasury was able to collect $65,000.
So that is like far less than one penny on the dollar. It’s almost nothing. It’s no recovery whatsoever if you round it to the nearest penny. That’s crazy.
So it’s a good point on behalf of the SBA to say, “look, this is not our first rodeo, right? For these smaller loans, collecting on them is very, very difficult. They’re probably people who are in very difficult situations. And so the tools that the treasury normally uses are not effective. And here’s our proof.”
And the, the IG argued with them about why those types of loans might not be relevant. But nonetheless, if the SBAs making the argument as to why these smaller loans should not be referred to treasury.
Here’s my question for the SBA, WHY ARE YOU NOT SETTLING THESE EIDL LOANS?
Like, you’re admitting yourself that once it goes to treasury, you’re not gonna get anything. And that’s what I tell a lot of my borrowers. Once it goes to the treasury, they can garnish your wages, uh, they can take their social security and they can take a tax refund. That’s it. The treasury’s not suing anybody.
So they’re not getting huge recoveries. And you know, for a lot of entrepreneurs, they’re not wage earners, so you can’t garnish their wages if they don’t have them.
And so my question for the SBA is, if you know that the recovery is gonna be so small, why would you not entertain settlements? Think of it this way. This guy who owes a hundred thousand dollars, if he gave you $5,000, that’s 5 cents on the dollar. That’s about as low as I’ve ever seen.
But if that guy can come up with say, between five and $20,000, why is the SBA not taking deals like that? Why are they not wheeling and dealing if the expected recovery is so low?
It’s almost like, it’s almost like the federal government doesn’t know what they’re doing. Ah, federal government incompetence. Unbelievable, right?
So again, I ask the SBA, why are you not settling these things? It makes no sense. And forget about like you should do it outta the goodness of your heart because these are hardworking small business owners.
Fine, whatever. I don’t need to appeal, uh, you know, to like tug of your heartstrings. What I would like to appeal to the SBA on is make a reasonable business decision. Historically speaking, you’re not getting any of this money back once it goes to treasury.
So why would you not immediately start cutting deals with these with businesses who have failed, who are like six months behind where you know that your options for collection are so minimal when you have somebody who’s standing in front of you and being like, “Hey, here’s some money.” And they’re like, “Nope, either I want it all or nothing.”
And that’s essentially what they’re saying right now, right? They’re not offering any help. They’re kicking the can down the road. They’ll give you the six months, at 10% (of the normal payment).
Great, but what happens in six months? You’re right back where you started. Can someone explained to me why it would not be a good business decision for the SBA to consider reasonable settlements?
And I’m not talking about what the SBA is (apparently) telling people. The, you know, the um, the time life operators who are answering the phone are telling people, oh, maybe (the SBA will settle for) 70 or 80% at some point. How does that help anybody?
If I owe a hundred grand and I can’t pay my monthly payment, you think I’m gonna come up with seven or 80 grand? No.
And so you can take this a hundred thousand dollars thing and apply it to all of ’em. There is so much money that’s out there that cannot be repaid and people are able to pay something, but not all of it. And so the SBAs position of “either you pay us in full or we’re gonna send you to the treasury” is so ridiculous because on the other side, there’s no collection. They have no leverage here.
For years and years and years, I’ve done settlements with regular SBA loans and I’ve always said, look, they’re willing to cut reasonable deals. They understand you can’t get blood from a stone, but yet when it comes to EIDL loans (for now), loans that were given to people in the worst possible scenario, all of a sudden the thinking has changed for this specific program. I don’t get it. It doesn’t make any sense.
But anyway, that’s my rant. Um, that’s the tidbit that I took out of this, that the SBA knows they’re not getting anything, yet in their infinite wisdom, they still haven’t figured out settlement is the right business decision.
That’s my rant. That is me just pointing out the hypocrisy of the SBA who wants to fight with the IG about why not to refer things for a hundred thousand because basically they’re uncollectible. Yet for larger loans, um, or even the a hundred thousand dollars loans, they can’t seem to figure out that maybe settling isn’t their best interest. I don’t get it.