The Small Business Administration (SBA) began referring $20B in delinquent Covid Loans, to the Treasury Department for immediate collection. Most of these were Economic Injury Disaster Loans (EIDLs) with a balance below $100K.
Prior to this, the SBA had already referred another loans that had a balance in excess of $100K to the Treasury Department. The number of referrals was over 10K.
These programs have a staggering number of defaults.
The SBA’s actions are a continued response to the challenges they’re having with the Covid loans. The agency has already charged off $390B in bad loans due to fraud, bankruptcy, or the death of the entrepreneur.
Borrowers in default of their repayment terms may immediately request hardship assistance which can put the collection process on hold. Whether or not this is possible depends on how far along the collection process has progressed. That assistance includes…
1 – Monthly payments of at least 10% of your agreed upon payments, with a minimum of $25, for up two six-month periods
2 – Making payments temporarily of 50% then 75% of your normal amount due, prior to resuming a normal payment schedule.
Let me leave you with this.
Please remember that EIDLs are regular 30 year loans with an applicable amortization schedule. They aren’t PPP Loans that can be forgiven. EIDLs loans originally lent with a balance over $200K carry a personal guarantee against default.
It’s not free money. It must be repaid.
Loans that remain in a delinquent status will be assigned to collection agencies. Those agencies may or may not decide at their own discretion, to file a legal action for collection of the debt.
Non-payment will certainly affect your business credit. And if there was a personal guarantee, it will also be reported to the appropriate credit bureaus.
Once these problems have been referred to an agency, it may be difficult if not impossible, to get them out of the agency and back to the SBA. Entrepreneurs who’ve made the payments necessary to get their loans back into good standing are complaining about the continued collection agency process.
It’s obviously better to not have these problems in the first place. Hiding from the Treasury Department will do nothing but exacerbate an already bad situation.
We’re all going to get through this. Let’s get through it together.
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