SBA ENDS THE HARDSHIP ACCOMMODATION PLAN FOR SBA EIDL LOANS
Effective March 19, 2025 the SBA has ended the Hardship Accommodation Plan (“Hardship Plan”) for SBA EIDL Loans.
The Hardship Plan allowed SBA EIDL loan borrowers to repay the SBA 10% of the loan payment due for a period of 6 months (with no default) to give the borrower breathing room to restructure or reorganize. Under the Hardship Plan, if a borrower's monthly payment was $2,000, they could pay the SBA $200 for a 6-month period. After 6 months, the payments increased to 20%, then 50%, then 70%, and finally 90% for 6-month intervals until the loan was repaid.
Under the Hardship Plan, interest continued to accrue under the original loan payment terms, causing the balance due to pay off the loan to increase during the Hardship Plan.
As we noted in a prior post, the SBA also eliminated the Offer in Compromise plan (https://shenwick.blogspot.com/2025/03/sba-does-not-allow-eidl-loans-to-be.html)
Fewer options now exist for the struggling SBA EIDL loan borrower.
Those options appear to be:
1 Loan modification: Borrowers can request modified payment terms or extended repayment periods or negotiated repayment plans with the SBA.
2. Hardship deferment: Borrowers experiencing economic challenges may be eligible for temporary payment deferrals.
3 Full Loan Repayment from business or personal assets, if possible.
4 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.
5 Refinancing your existing SBA loan with a private lender and use the loan proceeds to pay down or payoff the SBA.
6 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
7 Default on the SBA loan and engage in Asset Protection Planning in case of legal action by the SBA or the Treasury Offset Program.
At Shenwick & Associates, we can be retained to review the SBA Borrower & Guarantor financial information to determine the best course of action.
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, Esq 917 363 3391 jshenwick@gmail.com
Please click the link to schedule a telephone call with me.
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