SBA DOES NOT ALLOW EIDL LOANS TO BE COMPROMISED THREW AN OFFER IN COMPROMISE

 

SBA DOES NOT ALLOW EIDL LOANS TO BE COMPROMISED THREW AN OFFER IN COMPROMISE

 

Many clients have contacted our law firm seeking assistance in settling their outstanding SBA EIDL loans through an offer in compromise (OIC).

Unfortunately, the SBA's current position is that they do not allow EIDL loans to be settled through an OIC. While the OIC program is available for other types of SBA loans, EIDLs remain excluded from this option. 

The options to settle SBA loans are provided below.

1. Hardship Accommodation Plan.  The hardship accommodation plan lowers monthly payments for 6 months, and then payments increase over a time.

 2. Loan modification: Borrowers can request modified payment terms or extended repayment periods or negotiated repayment plans with the SBA.

3. Hardship deferment: Borrowers experiencing economic challenges may be eligible for temporary payment deferrals.

4 Full Loan Repayment from business or personal assets, if possible.

5 Liquidation of Business Assets: Close the business or sell business assets and pay off or pay down the SBA EIDL loan with the sales proceeds. The SBA loan documents require that any business assets sold and subject to an SBA loan must be paid to the SBA at the time of sale. However, the borrower will remain liable for any deficiency owing after the paydown.

6 Refinancing your existing SBAloan with a private lender and use the loan proceeds to pay down or payoff the SBA.

7 File for bankruptcy. If the SBA EIDL loan exceeded $200,000 and an individual or entity guaranteed the loan, both the SBA borrower and guarantor may need to file for bankruptcy to discharge the SBA loan

8 Default on the SBA loan and engage in Asset Protection Planning in case of legal action by the SBA or the Treasury Offset Program. 

Clients or their advisers with outstanding SBA EIDL loans who have questions about what they should do can contact Jim Shenwick, Esq to discuss their situation.

 

Jim Shenwick/Shenwick & Associates

Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com 

Please click the link to schedule a telephone call with me.

https://calendly.com/james-shenwick/15min

We help individuals & businesses with too much debt!

How to Sell a Business Subject to an SBA EIDL Loan

Many clients have contacted our law firm asking how to sell a business subject to an SBA EIDL loan. There are two scenarios. In the first, the sales proceeds are sufficient to pay off the SBA loan (the easier scenario). In this case, one is required to contact the SBA and obtain prior approval, pursuant to SBA loan documents. In the second scenario, the sales proceeds are not sufficient to pay off the SBA loan (the more difficult and complex scenario), resulting in a shortfall ("Shortfall"). 

With respect to the Shortfall scenario, the Borrower/Seller must do the following: 1. Provide the SBA with information about the proposed sale (prior to closing), 2. Submit the required SBA documents for the sale to the SBA, 3. Send the SBA the proposed Sales Agreement, 4. Provide the SBA with a business valuation or appraisal of the business being sold, 5. Provide the SBA with financial statements for the business being sold, and 6. Provide the SBA with a proposal for handling the loan shortfall (an Offer in Compromise, payment by the Guarantor, Loan assumption by the Buyer, etc.).

The proposed Sales Agreement should include a contingency clause stating that the sale is subject to SBA approval. 

Obtaining SBA approval can take months and may require negotiations with the SBA.

Clients or their advisors having questions about the sale of a business subject to an SBA loan should contact Jim Shenwick, Esq.

Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com 

Please click the link to schedule a telephone call with me.

https://calendly.com/james-shenwick/15min

We help individuals & businesses with too much debt!

Subchapter V debt limit will increase to $3,424,000

The National Law Review reports that the Subchapter V debt limit will increase to $3,424,000 on April 1, 2025. Currently, the Subchapter V debt limit is $3,024,725. 

The full article can be found at: https://natlawreview.com/article/bankruptcy-dollar-amounts-set-rise-significantly-april-1-2025  

Clients or their advisors with questions about Subchapter V Bankruptcy should contact Jim Shenwick, Esq. 

Jim Shenwick, Esq. 

917-363-3391

jshenwick@gmail.com

Please click the link to schedule a telephone call with me: https://calendly.com/james-shenwick/15min

We help individuals and businesses with excessive debt!