During the pandemic, Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans played a pivotal role in supporting businesses. However, managing these loans can become complex, especially when financial difficulties arise.
EIDL loans, administered by the Small Business Administration (SBA), serve as federal aid aimed at helping businesses recover from economic setbacks following declared disasters. Unlike traditional loans, EIDL assistance focuses on alleviating economic injury rather than physical damage. Businesses affected by events like the COVID-19 pandemic could apply for these loans to address financial strains.
Should a business fail to meet its EIDL loan obligations, default consequences can be severe:
In September 2025, the SBA began reporting EIDL and PPP loans to the Department of the Treasury and the Department of Justice. If you have received notices from any of these agencies, please contact Frost Law to discuss your options.
Call us today at (410) 220-6987 for a personalized case evaluation
Despite the challenges posed by default, businesses have avenues to address their situation. Offering partial payments as a gesture of goodwill can sometimes mitigate further actions. However, preparing for potential legal proceedings is crucial. Seeking legal counsel specialized in SBA matters can provide invaluable guidance. Businesses have options when it comes to resolving loan default including, loan deferment and repayment, filing for a hardship .
For businesses struggling with repayment, the SBA offers loan deferment options, extending the initial payment due dates. However, interest continues to accrue during deferment, prompting consideration of voluntary payments where feasible.
While resembling loan modification, an installment payment plan differs in that it doesn't alter the fundamental terms of your SBA loan. Instead, it restructures your payment schedule to better suit your financial circumstances. Our attorneys will conduct a thorough financial evaluation to determine a manageable monthly payment, ensuring you can fulfill your obligations without undue strain. Once a proposed plan is formulated, we advocate on your behalf, presenting it to the SBA and negotiating a payment schedule tailored to your capacity to repay.
Deferment involves temporarily delaying loan payments, whereas forbearance entails reducing or suspending payments for a specific period. While both options offer temporary relief, it's crucial to grasp the long-term implications. Upon determining the most suitable option for your circumstances, we engage in negotiations with the SBA to temporarily pause or lessen your payments. Our aim is to structure this interim relief in a manner that prevents further financial strain.
From November 2022 through March 19, 2026, the SBA had a Hardship Accommodation Plan, often abbreviated as HAP or simply called the "Hardship Plan." Under this plan, the SBA allowed EIDL borrowers to repay 10% of each payment for 6 months, with payments ramping up after that. The discontinued Hardship Plan is often confused with the SBA's current option, which reduces payments by 50% for 6 months.
When all other options have been exhausted, our bankruptcy attorneys can explore the possibility of discharging your SBA loan through bankruptcy proceedings. The outcome and ramifications, however, hinge on whether the bankruptcy is filed personally or for the business.
Businesses should also be aware of the statute of limitations regarding default lawsuits. While there's a time limit for filing such suits, the SBA retains the right to pursue collections through other means such as federal payment offsets, indefinitely.
Given the complexity of managing delinquent or defaulting EIDL loans, seeking professional legal assistance is advisable. Law firms specializing in SBA matters can provide nationwide representation and expertise in negotiating settlements and resolving debt disputes.
At Frost Law, we specialize in assisting businesses facing EIDL loan challenges. Our team provides comprehensive support to navigate the complexities of debt resolution. With a focus on safeguarding our clients' financial interests and preventing bankruptcy or foreclosure, our attorneys are authorized to represent federal debtors nationwide.
To address your Treasury or SBA debt concerns effectively, contact Frost Law today for a personalized case evaluation call us at (410) 220-6987 or schedule a confidential consultation.