SBA Faces New EIDL Collection Struggles

Unfortunately, with the size and nationwide scope of the COVID-19 pandemic, and the unprecedented number of EIDL loans that the SBA issued, we do not have the infrastructure in place to take possession of this collateral. The SBA is asking EIDL borrowers for help, especially EIDL borrowers facing delinquency. This is big news. Since one third of EIDL borrowers may default on their loans, this may affect you. Here's the headline SBA faces a billion dollar EIDL collateral problem. It's asking companies in bankruptcy to aid the effort. In short, the SBA secured collateral for millions of businesses through this EIDL program, and now it has limited options to collect on that collateral. So it's asking for EIDL borrowers help. Be sure to watch until the end and let me know what you think about this news. Thanks so much for subscribing, turning on alerts so you never miss out on anything funding or business related. And if you're continuing to look for funding, grants, loans, lines of credit, go check out the Skip dashboard to see dozens of options. Whether you're looking for 1000, 10,000, 100,000 or a million plus, there are options for you right now at helloskip.com or the link in the description. And for the first time ever, we published a list of the 104 $10,000 grants that we've published on Skip over the past four years. Want that list probably worth 10s of 1000s of dollars, go to 104grants.com to get the list, click I'm interested, then click the link to get the full list of 104 $10,000 grants. I did a video about that above. Let me start at the top because we've been covering COVID EIDL loans since day one. Since then half a trillion dollars has been distributed to over 4 million businesses across the US. The program hasn't changed significantly a dozen times from a 150k limit to 500k up to 2 million to extending the payment deferment to 30 months and to allowing people to enroll in hardship accommodation. That started about a year and a half ago where if you were still having trouble paying, which is what the SBA was seeing a lot of you were struggling to make payments, you could enroll in reduction of payments for up to two years, only paying 10% of your regularly scheduled COVID EIDL payments. So if you were supposed to pay $2,000 a month, you could elect to pay only 200 for six months and then extend it for another six months up to four times with interest still accruing. That's the most important part I reported a few weeks ago in this video that for the first time ever, the majority of COVID EIDL borrowers are finally making payments towards their principal up until this point it had all been going to interest, which can be a rather depressing thought. Then this just came out the US SBA needs help selling off collateral tied to loans it issued through its EIDL program and is turning to those same business owners that put up the collateral for assistance. In January of this year, the SBA reported that 74% of the COVID EIDL portfolio was current on payments paid in full or slightly past due. So the inverse there is 26% we're getting close to delinquency or in delinquency or written off the government has previously projected a 37% default rate for this program. According to data from our EIDL forgiveness petition, the largest petition in the country asking for some relief that could be just eliminating the interest or could be full forgiveness. Over six and a half thousand signatures, you can always go there to add your signature. If you haven't yet EIDL.me, we keep sharing this with lawmakers, particularly the chairs of the House and Senate small business committees. So they know about this, they know about the challenges you have if you are one of the 4 million EIDL borrowers. Well on this petition people self reported how much their EIDL loan was for based on this sample 12% took loans of 25k or less. That means 88% or above that. Well, why is that important? 25k is the magic number for collateral jumping ahead while only loans above 200k came with a personal guarantee unless the owner was a sole proprietor. The SBA pressed for all loans above $25,000 to come with some kind of collateral. The SBA preferred real estate for larger loans, but that collateral could be restaurant equipment, or anything else that could potentially have value. Well, here's the problem the agency is asking owners of those businesses, companies that are in bankruptcy proceedings, along with other creditors such as landlords to draw on their quote, desire as a taxpayer to spend time and money addressing the SBA's own lien holder rights in regard to this collateral. The SBA has contacted at least several parties about this via email. These emails were shared with the playbook. This article is from the business journals, and it's asking for those organizations to sell off the collateral they used to secure the loans and give the proceeds to the SBA. How about that? Those actions would occur according to the email without any compensation for the effort made. Another quote from the email, unfortunately, with the size and nationwide scope of the COVID-19 pandemic, and the unprecedented number of EIDL loans the SBA issued, we do not have the infrastructure in place to take possession of this collateral, then find a willing buyer and sell it without taking on additional expenses that have not been authorized by the taxpayer when Congress created this loan program. The SBA in its outreach asked for a raft of documents including contracts, escrow statements and agreements relating to the collateral sales, as well as an itemized list of all collateral that was abandoned and it's fair market value. And finally, we're asking for your help in identifying a purchaser for the assets of collateral abandoned by the borrower. We understand that you are under no obligation to assist us with this process. Again, we're hoping to rely on your civic mindedness and desire as a taxpayer. But in some ways our hands are tied. That's another quote from this email the SBA sent. According to this article and the playbook, this is quite the predicament the agency in its email said it cannot give up its priority position and let other creditors on the in distress companies take the collateral and sell it in terms of how the SBA collects collateral a quote from the SBA says the SBA takes prudent commercially reasonable actions to avoid loss of collateral or dissipation of collateral value when asset liquidation is required. The agency also relies on borrowers cooperation to increase its recovery on the loan. The long of the short the SBA really struggling to figure out the best way to extract value from collateral for EIDL borrowers who are facing bankruptcy. What do you think of this predicament? Are you sympathetic with the SBA? Do you feel that folks in this situation should do their best to try to sell their collateral so they can pay back the SBA out of quote civic mindedness? And does this affect you? Let me know in the comments. 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