Small Business Administration Implements 60-Day Goodwill Exception for PPP, EIDL Loans

Overview

In a bid to alleviate the financial burden on entrepreneurs who secured loans during the tumultuous COVID-19 pandemic, the Small Business Administration (SBA) has introduced a 60-day goodwill grace period for Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) below $100,000. This grace period aims to provide breathing room for business owners to secure loan forgiveness or make suitable repayment arrangements, averting the threat of collection actions.

Key Points

• The SBA will refrain from forwarding delinquent loans under $100,000 to the IRS or Treasury Department for collections during the 60-day grace period.


• This hiatus will be utilized to guide PPP borrowers through the loan forgiveness application process and educate EIDL borrowers about repayment options, including hardship repayment opportunities.


• Borrowers can conveniently check the status of their loans via the MySBA loan portal, a centralized platform that consolidates information on all SBA loans, including PPP loans.


• Prior to the termination of the COVID EIDL program in May 2022, the SBA approved approximately 3.9 million loans, disbursing a total of $378 billion. These loans carry a favorable 3.765% interest rate, a 30-year repayment term, and a two-year grace period before payments commence.


• Business owners grappling with payment difficulties can seek relief through the SBA’s Hardship Accommodation Plan, which reduces their monthly payment to a manageable 10% for a six-month period. Extensions of up to four additional six-month hardship periods are available if circumstances demand.

Background

• Initially, the Biden administration had declared that the federal government would not pursue small businesses that had withdrawn funds under the COVID-19 Economic Injury Disaster Loan program.


• However, in an abrupt policy reversal earlier this month, the administration announced its intention to pursue business loans distributed during the pandemic.

Benefits of Maintaining Current Status on SBA Loans

• Upholding a good credit score is crucial for securing favorable terms on future loans, home purchases, and car financing.


• Businesses with a clean credit history remain eligible for future government financial assistance programs, such as VA loans and disaster relief.


• Avoiding federal and private collections activities, such as withholding tax returns and wage garnishment, ensures uninterrupted business operations.

Navigating the Loan Forgiveness Process

• PPP borrowers unsure about the status of their loan forgiveness can access the MySBA loan portal to obtain up-to-date information.


• Borrowers who have yet to apply for forgiveness are strongly encouraged to initiate the process immediately through the portal.


• The SBA website provides comprehensive guidelines and resources to assist borrowers with the forgiveness application process.

Repayment Options for EIDL Loans

• EIDL borrowers facing financial challenges can apply for the SBA’s Hardship Accommodation Plan, which offers reduced monthly payments of 10% for a six-month period.


• Borrowers can request up to four six-month hardship extensions if necessary.


• The SBA offers additional repayment options, including deferment and modification, to accommodate borrowers experiencing financial difficulties.

Conclusion

The Small Business Administration’s implementation of a 60-day goodwill grace period for PPP and EIDL loans under $100,000 underscores its unwavering commitment to supporting entrepreneurs as they navigate the ongoing economic recovery from the COVID-19 pandemic. By providing a grace period and assisting borrowers with loan forgiveness and repayment options, the SBA aims to alleviate the financial burden on small businesses and help them maintain their operations. This initiative reflects the agency’s dedication to fostering a conducive environment for small businesses to thrive and contribute to the nation’s economic growth.