Will the SBA’s EIDL Loans be Forgiven?

As of January 2025, there are no plans to forgive outstanding SBA EIDL loans. There are a variety of challenges involved with widespread forgiveness. It’s unlikely that our new administration has the same stance on debt forgiveness as the previous one, which suggests that these outstanding loans may never see the same treatment as their PPP counterparts.

We’re five years since the rapid onset of the COVID-19 pandemic. Businesses have bounced back, and the market has mostly adapted to the “new normal” we’re living in, but there are still some lingering effects from those historic days that still plague some businesses.

Many small businesses leveraged the SBA’s Economic Injury Disaster Loan (EIDL) program to keep their doors open as stay-at-home mandates set in and supply chains shattered. SBA EIDL loans offered a lifeline to businesses during this time, but that same lifeline has transformed into a significant burden for some members of the small business community.

The EIDL program extended $380 billion from 2020 to 2022. As of late 2023, over $300 billion remains outstanding. The lifeline that saved businesses is now burdening them, and many people are wondering whether our new administration will forgive this debt, as PPP debt was.

Still, there has yet to be news regarding whether our new administration plans to forgive them. Our CEO was quoted discussing the topic and his stance on whether forgiveness is viable.

“Loans like this are rare; if a business can’t make these terms work, it’s probably not the loan that’s the issue. More likely, it points to other underlying management issues.”

National Business Capital’s CEO, Joseph Camberato, in The Business Journal.

The Challenge with EIDL Loan Forgiveness

Widespread forgiveness of EIDL loans poses a challenge to the government, specifically the Small Business Administration and the average taxpayer. Because the balance is so high, widespread forgiveness would significantly damage the SBA’s financials and, ultimately, erase a large volume of taxpayer dollars. They would essentially write off $300 billion, including the $50 billion interest accrued.

Imagine if your company had an outstanding balance with a vendor of that amount. If they wrote that money off, that would be a $300 billion loss, which could send your financials into a freefall. A loss of that amount could halt the SBA’s operations for years to come.

The SBA attempted to sell off its EIDL portfolio in September 2021 and June 2022 but ultimately decided that the sale wasn’t in the government’s best interest. Their stance remains today, but the reasoning has changed: Selling the portfolio has become too expensive for the SBA to move forward.

“Forgiving these loans just isn’t fair to taxpayers, who shouldn’t have to foot the bill for businesses that haven’t adapted. We need to look at how these businesses are run, rather than forgiving loans designed to give them every chance to succeed.” Camberato continued.

His stance isn’t baseless. Many companies burdened by EIDL loan debt have historically had financial challenges in their business, as shown in the FED Small Business graph below.

5 Strategies for Companies with EIDL Loan Debt

Here are some strategies that companies with EIDL loan debt can leverage to improve their financial situation:

• Assess Your Financial Position: Review your current cash flow to determine how much you can realistically allocate toward loan payments.
• Communicate with the SBA: Businesses overwhelmed with SBA debt can reach out to the Small Business Administration themselves and explore repayment assistance options. There’s no guarantee that you’ll qualify for an available program, but it’s always a good idea to reach out and ask. It’s recommended to do this sooner rather than later, as waiting until debt becomes unmanageable can reduce your negotiating power.
• Bolster Revenue: If current payments are overwhelming, growing your revenue through expanded distribution channels, new products/services, or other strategies can make large payments more manageable. It could be as simple as raising prices slightly, but you’ll never know until you dig into the numbers and do some due diligence.
• Seek Financial Guidance: Consult a business finance advisor, CPA, or turnaround specialist for more information on available resources and actionable strategies.
• Explore Grants & Relief Programs: Check local, state, and private sector funding opportunities.