Are you dealing with a defaulted Small Business Administration Economic Injury Disaster Loan (SBA EIDL)? Are the accumulating debts turning your financial world upside down? You're not alone. Defaulting on an SBA EIDL loan can be a stressful experience, but there's a potential solution – an Offer In Compromise (OIC). As experienced EIDL lawyers, we're here to guide you on how to reduce your EIDL loans through an OIC.
What Is An SBA EIDL Loan?
The SBA EIDL program is meant to provide financial assistance to specific businesses currently undergoing a short-term loss of revenue due to disaster. The loan can be used to pay accounts payable fixed debts, payroll, and other obligations that can't be satisfied due to the disaster's impact.
The COVID-19 Economic Injury Disaster Loan (EIDL) and EIDL Advance initiatives have been aimed at aiding small businesses dealing with the economic consequences of the COVID-19 pandemic. There are two varieties of COVID-19 EIDL financing:
- The EIDL loan program is meant to provide funding for day-to-day business operations and working capital. These loans need to be repaid and the prerequisites fluctuate based on the loan size. Moreover, the opportunity for increasing the loan amount is possible until the available funds run out.
- The EIDL Advance program is for pre-existing COVID-19 EIDL applicants who satisfy certain conditions. Unlike typical governmental grants, these advances have a different set of criteria, and the great news is that they don't have to be paid back.
From the beginning of 2022, the Small Business Administration (SBA) ceased accepting new applications for COVID-19 Economic Injury Disaster Loan (EIDL) loans or advances. Following this, on May 6, 2022, the SBA stopped handling requests for increases in COVID-19 EIDL loans or for reassessment of previously rejected loan applications. Finally, the COVID-19 EIDL portal, also referred to as the "RAPID portal," was officially closed on May 16, 2022.
What Happens When You Default On An EIDL Loan?
Failing to repay your SBA EIDL loan can lead to default, which can further lead to serious consequences, including potential legal action and damage to your credit score. If you're in a position where you can't meet your repayment obligations, it's important to seek advice from a professional EIDL lawyer as soon as possible.
Introducing The Offer In Compromise (OIC) To Settle EIDL Debts
Fortunately, there's a way out. An Offer in Compromise (OIC) is a federal program that allows you to settle your SBA EIDL loan for less than what you owe. This program functions similarly to the IRS OIC program for outstanding taxes.
Historically, only closed businesses could file an OIC with the SBA. However, recent changes in the SBA rules now allow businesses that are still operating to file an OIC. This new flexibility gives more businesses the chance to resolve their financial issues.
How Does An Offer In Compromise Work?
In an OIC, you offer to pay a lump sum to the SBA that is less than your total outstanding debt as final and full payment for your EIDL loan. For example, if you borrowed $200,000 and are unable to repay, you might offer a lump sum of $25,000 to settle the loan.
To apply for an OIC, you must disclose your business’s assets, liabilities, revenue, and expenses. You'll also need to explain why you can't repay the full SBA EIDL loan. It's critical to present a compelling case for your financial hardship to increase your chances of approval.
Benefits Of Filing An Offer In Compromise
Filing an OIC has several benefits. It can help you reduce your outstanding EIDL loan, avoid bankruptcy, and regain control of your financial situation. It also helps you avoid the negative consequences of a loan default, such as litigation and credit damage.
FAQ
What Does An EIDL Default Mean For My Business?
Defaulting on your EIDL loan means you've failed to meet your repayment obligations. This can lead to legal actions, a damaged credit score, and may impact your ability to obtain future financing.
How Does An Offer In Compromise (OIC) Work?
An OIC allows you to settle your debt for less than the full amount you owe. It's an agreement between you and the SBA where you propose a lesser amount to settle the loan. If the SBA accepts your offer, you pay the agreed amount, and the rest of your debt is discharged.
Does An OIC Guarantee Debt Forgiveness?
No, an OIC does not guarantee debt forgiveness. The SBA assesses your offer based on your financial condition and your demonstrated inability to repay the full loan. Approval is at the SBA's discretion.
Can I File An OIC If My Business Is Still Operating?
Yes, recent changes to SBA rules allow businesses that are still open to file an OIC. This is a significant shift from the previous rule where only closed businesses could file.
How Can An EIDL Lawyer Assist In The OIC Process?
An EIDL lawyer understands the intricacies of the OIC process and can guide you in preparing a compelling case. They can assist with necessary paperwork, ensure accurate financial reporting, and negotiate with the SBA on your behalf.
What Happens If My OIC Is Rejected?
If your OIC is rejected, the SBA will likely proceed with collections. However, you may have the opportunity to submit a new OIC or explore other options with your EIDL lawyer.
Can Filing An OIC Affect My Credit Score?
Filing an OIC does not directly affect your credit score. However, if your OIC is accepted and your debt is settled for less than the owed amount, it may be reported to credit bureaus and could potentially impact your credit score.
Remember, every case is unique. It's crucial to consult with an experienced EIDL lawyer to understand the potential implications and benefits of filing an OIC for your specific situation.
Let Us Help You Achieve An EIDL Settlement Through An OIC
An OIC can be a complex process that requires careful planning, thorough financial analysis, and persuasive negotiations. Our skilled EIDL lawyers can provide the skill and representation you need to navigate the OIC process successfully. We're dedicated to helping businesses reduce their EIDL loans, and we'll work diligently to seek the best possible outcome for your situation.
Don't let a defaulted SBA EIDL loan turn your financial life into turmoil. Contact Law Office of Simon Goldenberg, PLLC, at (888) 301-0584 or online consumer protection firm today and let us guide you towards an effective EIDL settlement through an Offer in Compromise.
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