As of January 2025, there are no plans to forgive outstanding SBA EIDL loans. There are a variety of challenges involved in widespread advocacy. It is unlikely that our new management will have the same debt forgiveness situation as before, suggesting that these loans may never see the same treatment as their PPP counterparts.
It has been five years since the rapid onset of the COVID-19 pandemic. Businesses have bounced back, and the market is adjusting to the “new normal” we live in, but there are still lingering effects from those historic days that plague some businesses.
Many small businesses have used the SBA’s Economic Injury Disaster Loan (EIDL) program to keep their doors open as stay-at-home mandates have been implemented and supply chains have collapsed. SBA EIDL loans have provided businesses with a lifeline during this time, but that same lifeline has turned into a huge burden for some members of the small business community.
The EIDL program has been extended by $380 billion from 2020 to 2022. As of late 2023, more than $300 billion remains. The way that saved businesses is now burdening them, and many people are wondering if our new administration will forgive this debt, like the PPP debt.
However, there is still news about whether our new administration plans to pardon them. Our CEO was quoted discussing this topic and his stance on whether forgiveness works.
“Loans like this are rare; if the business can’t make these terms work, it’s probably not the loan that’s the problem. It may point to other management problems.”
The CEO of National Business Capital, Joseph Camberato, in The Business Journal.
Challenge with EIDL Loan Forgiveness
The widespread forgiveness of EIDL loans poses a challenge to the government, especially the Small Business Administration and the average taxpayer. Because the balance is so high, widespread forgiveness can seriously hurt the SBA’s finances and, ultimately, wipe out a large volume of taxpayer dollars. They will remove $300 billion, including $50 billion in accrued interest.
Imagine if your company had an outstanding balance with a merchant of that amount. If they write off that amount, that would be a $300 billion loss, which could send your currencies into free fall. The loss of that money could cripple the SBA’s operations for years to come.
The SBA attempted to sell its EIDL portfolio in September 2021 and June 2022 but ultimately determined that the sale was not beneficial to the government. Their position still stands today, but the thinking has changed: Selling the portfolio has become too expensive for the SBA to move forward.
“Forgiving these loans is not good for taxpayers, who should not be taxing businesses that have not changed.” We must look at how these businesses are run, rather than forgiving loans that are designed to give them every chance to succeed.” Camberato continued.
His position is baseless. Many companies burdened with EIDL loan debt have experienced financial challenges in their business, as shown in the FED Small Business graph below.
5 strategies for companies with EIDL loans
Here are some strategies companies with EIDL loan debt can use to improve their financial situation:
- Check Your Financial Status: Review your current cash flow to determine how much you can reasonably allocate to loan payments.
- Contact the SBA: Businesses burdened with SBA debt can reach out to the Small Business Administration themselves and explore payment assistance options. There is no guarantee that you will qualify for an available program, but it is always a good idea to reach out. It is recommended that you do this sooner rather than later, as waiting until the debt is out of control can reduce your bargaining power.
- Bolster Revenue: If current payments are large, increasing your revenue through expanded distribution channels, new products/services, or other strategies can make large payments manageable. It could be as simple as raising the prices a bit, but you’ll never know until you dig into the numbers and do some due diligence.
- Seek Financial Guidance: Consult a business financial advisor, CPA, or turnaround professional for more information about available resources and strategies that can be implemented.
- Explore Grants and Assistance Programs: Explore local, state, and private sector funding opportunities.
