Key points of the article include:

• Transfer of Collections: The SBA's decision to transfer the responsibility for collecting delinquent COVID-19 loans to the U.S. Treasury Department marks a significant shift in strategy, aiming to streamline the collection process and recover funds more efficiently.
• Impact on Small Businesses: This move may affect small businesses struggling to repay their loans, as the Treasury Department's collection mechanisms can be more rigorous compared to the SBA's approach. Businesses may face increased pressure to settle their debts, potentially impacting their financial stability.
• Future Implications: The decision could have long-term implications for government lending programs, potentially influencing future policy decisions on disaster relief and emergency funding for small businesses. It raises questions about the balance between supporting businesses in crisis and ensuring fiscal responsibility.

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Now, on to the story . . . .

In an unprecedented move, the U.S. Small Business Administration (“SBA”) has announced its decision to hand over the collection of delinquent COVID-19 loans to the U.S. Treasury Department. This decision underscores the government's intensified efforts to recover funds extended to small businesses during the pandemic's peak. These loans, part of the Paycheck Protection Program (“PPP”) and the Economic Injury Disaster Loan (“EIDL”) programs, were pivotal in keeping small businesses afloat as they navigated the economic turmoil caused by COVID-19.

The shift to the Treasury for collections signifies a new phase in the government's approach to managing the fallout of the pandemic's economic impact on small businesses.

As the SBA announced in its recent press release:

The shift to the Treasury for collections on the EIDL loans signifies a new phase in the government's approach to managing the fallout of the pandemic's economic impact on small businesses.  The release doesn't give the whole picture however.  Forgiven loans constitute “ordinary income” on which taxes need to be paid to the IRS. So, even loan forgiveness is not a “freebie”.

If you have an EIDL loan in default, contact us at (908) 540-6901 or [email protected] We're here to help.

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