COVID-19 Economic Injury Disaster Loans can be settled with smaller 'hardship' payments, SBA says
Troy Diaz, lead lender relation specialist at the SBA, right, speaks with Luis Vazquez. Credit: Rick Kopstein
Businesses and nonprofits having trouble repaying their COVID-19 Economic Injury Disaster Loan can avoid a costly default by requesting to make smaller “hardship” payments for a period, an official with the U.S. Small Business Administration said on Wednesday.
Troy Diaz, who works with banks and other lenders in the SBA’s New York district office, said the reasons why borrowers couldn't fulfill their loan obligations vary, from sales being below pre-pandemic levels and the loss of a big contract to missed loan payments after a change in bookkeepers.
Nearly 4 million COVID EIDL loans were made nationwide during 2020-22 in amounts of up to $2 million each, though the maximum loan amount was reduced to $150,000 for a time. The term was 30 years with fixed interest rates of 3.75% for businesses and 2.75% for nonprofits.
The program, unlike other pandemic relief, was funded by the U.S. Department of the Treasury and run by the SBA.
When a COVID EIDL is delinquent for 120 days, the SBA hands the loan off to Treasury, which claws back Social Security checks, income tax rebates and other government payments to repay the loan. After a further 110 days, the COVID EIDL loan may go to a private debt collector, Diaz told about 60 business owners, bankers and economic developers at a workshop in Uniondale.
“It’s not a situation that anyone wants to find themselves in,” he said. “A private debt collector is going to assess a 30% penalty on the unpaid [loan] balance. So, a $100,000 loan could balloon to $130,000.”
Diaz, a former banker, warned that once Treasury took over a delinquent COVID EIDL, the loan could not be returned later to the SBA for repayment services, including hardship payments.
“If you are having difficulty repaying the loan, contact the SBA about our Hardship Accommodation Plan [or HAP] before the situation becomes worse,” he told Newsday after the workshop. “Requests for smaller monthly payments are usually granted.”
Under the HAP, borrowers can pay 10% of their usual loan payment for six months without first having to catch up on missed payments. Interest will continue to accrue. The regimen can be renewed for an additional six months.
If after one year the borrower is still having difficulty, they can request to pay 50% of their usual loan payment for six months and then 75% for another six months, Diaz said
Visit www.sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan/manage-your-eidl for more information.
Nearly 198,000 COVID EIDL borrowers are now enrolled in the HAP nationwide, an increase of 134,620 since February.
“Borrowers are heeding the call; they’re getting back on track” to avoid a loan default, Diaz said during the 90-minute information session, which was sponsored by the law firm Ruskin Moscou Faltischek, the lobbying firm Empire Government Strategies and Flushing Bank.
Diaz also said the Treasury Department removed many delinquent loans from its Cross Servicing program, effective May 12. The program involves private debt collectors, the U.S. Department of Justice and the Internal Revenue Service pursuing deadbeat borrowers.
The affected loans were put back into Treasury's first-level of repayment measures, he said.
Separately, John Mallano, director of SBA's New York district, which includes Long Island, urged small businesses that want to increase sales to consider bidding for contracts to supply Washington.
"The U.S. government is the largest purchaser of goods and services in the world. … Anything you can think of the federal government buys," he said, adding there are requirements that small firms and those owned by women, veterans and members of minority groups be active participants in the contracting process. "This is good way to grow your business without leaving the country [via exporting goods and services]."
Businesses and nonprofits having trouble repaying their COVID-19 Economic Injury Disaster Loan can avoid a costly default by requesting to make smaller “hardship” payments for a period, an official with the U.S. Small Business Administration said on Wednesday.
Troy Diaz, who works with banks and other lenders in the SBA’s New York district office, said the reasons why borrowers couldn't fulfill their loan obligations vary, from sales being below pre-pandemic levels and the loss of a big contract to missed loan payments after a change in bookkeepers.
Nearly 4 million COVID EIDL loans were made nationwide during 2020-22 in amounts of up to $2 million each, though the maximum loan amount was reduced to $150,000 for a time. The term was 30 years with fixed interest rates of 3.75% for businesses and 2.75% for nonprofits.
The program, unlike other pandemic relief, was funded by the U.S. Department of the Treasury and run by the SBA.
WHAT TO KNOW
- Some businesses and nonprofits are struggling to repay COVID-19 Economic Injury Disaster Loans that were granted in 2020-22.
- A “hardship” repayment program from the U.S. Small Business Administration can help borrowers to avoid a costly default.
- A loan that is delinquent for 120 days must be turned over to the U.S. Department of the Treasury.
When a COVID EIDL is delinquent for 120 days, the SBA hands the loan off to Treasury, which claws back Social Security checks, income tax rebates and other government payments to repay the loan. After a further 110 days, the COVID EIDL loan may go to a private debt collector, Diaz told about 60 business owners, bankers and economic developers at a workshop in Uniondale.
“It’s not a situation that anyone wants to find themselves in,” he said. “A private debt collector is going to assess a 30% penalty on the unpaid [loan] balance. So, a $100,000 loan could balloon to $130,000.”
Diaz, a former banker, warned that once Treasury took over a delinquent COVID EIDL, the loan could not be returned later to the SBA for repayment services, including hardship payments.
“If you are having difficulty repaying the loan, contact the SBA about our Hardship Accommodation Plan [or HAP] before the situation becomes worse,” he told Newsday after the workshop. “Requests for smaller monthly payments are usually granted.”
Under the HAP, borrowers can pay 10% of their usual loan payment for six months without first having to catch up on missed payments. Interest will continue to accrue. The regimen can be renewed for an additional six months.
If after one year the borrower is still having difficulty, they can request to pay 50% of their usual loan payment for six months and then 75% for another six months, Diaz said
Visit www.sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan/manage-your-eidl for more information.
Nearly 198,000 COVID EIDL borrowers are now enrolled in the HAP nationwide, an increase of 134,620 since February.
“Borrowers are heeding the call; they’re getting back on track” to avoid a loan default, Diaz said during the 90-minute information session, which was sponsored by the law firm Ruskin Moscou Faltischek, the lobbying firm Empire Government Strategies and Flushing Bank.
Diaz also said the Treasury Department removed many delinquent loans from its Cross Servicing program, effective May 12. The program involves private debt collectors, the U.S. Department of Justice and the Internal Revenue Service pursuing deadbeat borrowers.
The affected loans were put back into Treasury's first-level of repayment measures, he said.
Separately, John Mallano, director of SBA's New York district, which includes Long Island, urged small businesses that want to increase sales to consider bidding for contracts to supply Washington.
John Mallano, NY District director of the SBA, encouraged Long Island business owners to work with the federal government. Credit: Rick Kopstein
"The U.S. government is the largest purchaser of goods and services in the world. … Anything you can think of the federal government buys," he said, adding there are requirements that small firms and those owned by women, veterans and members of minority groups be active participants in the contracting process. "This is good way to grow your business without leaving the country [via exporting goods and services]."
James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.
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