EIDL Loan News: Hardship Plans, Settlements, and Default

COVID-19 EIDL loan repayment is now underway for every borrower, with a fixed interest rate of 3.75% for businesses (2.75% for nonprofits), a 30-year term, and no forgiveness option.¹ If you’re struggling to keep up, you still have real options: a hardship plan that cuts payments to as little as $25 a month, a settlement process for borrowers who can’t pay in full, and a reinstatement path if your loan has been charged off but not yet handed to the Treasury. The one thing you can’t do is wait, because once your account moves to Treasury collections the SBA’s flexibility disappears.

What You Actually Owe Now

In March 2022, the SBA set a total deferment of 30 months from the date of each borrower’s promissory note.² That window has closed for every EIDL borrower, and regular principal-and-interest payments are due.

Deferment paused payments, not interest. Interest accrued through the full 30 months and then capitalized onto the principal. On a $150,000 loan at 3.75%, that added roughly $14,000 before the first payment was due.³ Your current balance is almost certainly higher than what you borrowed, and your monthly payment is calculated on the larger figure.

There is no prepayment penalty. If your business has recovered, extra payments against principal cut your lifetime interest, and even occasional lump sums help. One-time and recurring payments both go through the SBA Loan Portal at lending.sba.gov.⁴

Reducing Your Monthly Payment: The Hardship Accommodation Plan

The Hardship Accommodation Plan temporarily reduces what you owe each month. For an initial six-month period, enrolled borrowers can pay as little as $25, with payments gradually stepping back up over a multi-year schedule.⁵

Interest keeps running the whole time. The unpaid portion compounds onto your balance, so when you return to full payments you owe more than before. That trade-off is still worth it compared with missing payments outright, but treat the HAP as a bridge rather than a long-term solution.

Loans in repayment, past due, or in default all qualify, as long as the account has not yet been referred to Treasury for cross-servicing. How you enroll depends on loan size:

Loans of $200,000 or less: enroll directly through the SBA Loan Portal.
Loans over $200,000: contact the COVID-19 EIDL Servicing Center to enroll.

You can request the HAP starting 60 days before your next payment is due, so you don’t have to wait until you’re already behind. Applying before you miss a payment is the smarter move.

Settling for Less Than You Owe

If repayment in full isn’t realistic, you can propose a lump-sum settlement through the SBA’s Offer in Compromise process using SBA Form 1150.⁶ If the SBA accepts, you pay the agreed amount and the rest of the debt is released.

The SBA will only consider an offer after collateral securing the loan has been liquidated under agency guidelines. For loans above $25,000, where the SBA took a blanket lien on business assets, those assets have to be dealt with first.³ Acceptance is not guaranteed; the SBA evaluates whether your offer represents the maximum it could reasonably collect given your financial picture. A CPA or attorney experienced in SBA workouts is usually worth the cost, because a poorly structured offer gets rejected and burns time.

If You’re Closing the Business

Closing shop does not cancel an EIDL loan. The debt survives the business, and what the SBA can pursue depends on what you signed:

Loans of $25,000 or less: no collateral, no personal guarantee. The SBA’s recovery is limited to any remaining business assets.
Loans above $25,000: the SBA holds a blanket lien on business assets and can seize equipment, inventory, and receivables.
Loans above $200,000: you also signed a personal guarantee, so the SBA can pursue your personal assets if the business can’t cover the debt.³

Contact the SBA before you shut down. The agency directs borrowers anticipating closure or liquidation to send a message through the SBA Loan Portal or email COVIDEIDLServicing@sba.gov.⁷ Reaching out early opens workout options that disappear once collections take over.

What Happens If You Miss Payments

Your loan is delinquent as soon as you miss a payment. The SBA sends warning letters, but the point of no return is 120 days of delinquency, when your account may be referred to the Treasury Offset Program.⁷

The Treasury Offset Program intercepts federal payments owed to you and redirects them to your debt. That includes tax refunds, Social Security benefits, and federal vendor payments. You’ll get a letter at least 60 days before an offset begins, explaining the debt and your rights to dispute it or set up a payment agreement.⁸ A partial offset still releases the remainder to you; otherwise the full payment is seized.

Further delinquency moves the loan to the Treasury’s Cross-Servicing Program. At that point the SBA is no longer your servicer and can’t help you. You deal with the Treasury Bureau of the Fiscal Service, which has broader enforcement tools, and for loans backed by a personal guarantee, the Treasury can go after the guarantor’s personal assets.

If your loan has been charged off by the SBA but has not yet been referred to Treasury cross-servicing, you may still be able to restore it. Log into the SBA Loan Portal, pay the full overdue balance, and email COVIDEIDLServicing@sba.gov to request reinstatement to current status.⁷ That window closes permanently once Treasury takes over.

Tax Angles Worth Knowing

Interest you pay on an EIDL is generally deductible as a business expense because the loan was taken for business purposes, and most small businesses can deduct the full amount.⁹

If part of your EIDL is canceled through an Offer in Compromise or other settlement, the forgiven amount is generally taxable income in the year of cancellation. If $600 or more is canceled, the creditor must send you a Form 1099-C.¹⁰ An insolvency exclusion may apply if your total debts exceeded the fair market value of your assets at the time of cancellation.¹¹ If a settlement is on the table, plan for the tax hit or ask a tax professional whether the insolvency exclusion fits your situation.

Where to Manage Your Loan

Nearly everything related to an EIDL runs through the SBA Loan Portal at lending.sba.gov: your balance, payment history, next due date, contact and bank information, HAP enrollment on loans of $200,000 or less, and payments.⁴ To make a payment, log in, click the action button next to your loan, choose “Payments,” then “Make Payment,” and select either a one-time or recurring schedule.

For anything the portal can’t resolve:

Email CESC@sba.gov for general COVID EIDL servicing questions, or COVIDEIDLServicing@sba.gov for business closure, reinstatement, and loan workouts.
Call 833-853-5638 (TTY: 711) for payment assistance through the SBA Secure Payment Portal.

If your loan has already moved to the Treasury’s Cross-Servicing Program, none of the SBA contacts above can help. You’ll need to work directly with the Treasury Bureau of the Fiscal Service from that point on.⁷

1
U.S. Small Business Administration. COVID-19 Economic Injury Disaster Loan
2
U.S. Small Business Administration. SBA Administrator Guzman Announces Key Policy Change
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U.S. Small Business Administration. About COVID-19 EIDL
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U.S. Small Business Administration. Make a Payment to SBA
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U.S. Small Business Administration. Small Business Administration Announces Further Action to Help PPP and COVID EIDL Borrowers
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U.S. Small Business Administration. SBA Form 1150 Offer in Compromise
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U.S. Small Business Administration. Manage Your EIDL
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Bureau of the Fiscal Service. What Is the Treasury Offset Program
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Internal Revenue Service. Questions and Answers About the Limitation on the Deduction for Business Interest Expense
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Internal Revenue Service. About Form 1099-C, Cancellation of Debt
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Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not