Will SBA Offer Forgiveness or Offer in Compromise for EIDL in 2024?

Hey guys, my name is Jason. I'm the founder of Distress Loan Advisors. If you're looking for one-on-one advice for your SBA EIDL 7A 504 loans, you can schedule time with me. There is a link below, or you can visit my website, jasontees.com. Today's video, I'd like to address a question that I do get from people fairly frequently during case evaluations. And the question is, do you foresee the SBA forgiving EIDL loans? And the answer that I usually give is that I am pessimistic on that idea. And I think there's three main reasons why forgiveness, like flat-out forgiveness, like not a settlement, but just, hey, you used to owe this amount of money, now you owe nothing. There's three main reasons why I think that that will not be the case. First, I think there are political headwinds. So if you follow the news as far as what our government is doing, from time to time they do have hearings specific to EIDL loans and PPP loans where it's either the Senate or the Congress, they take turns basically beating up people from the SBA about why they're not doing more to collect. And so because of that, I think it would be difficult to push anything through that just allows blanket forgiveness across the board. I think if anything, the more politically conservative elected officials seem to be pushing more for more collections. They're questioning the SBA, why are you not doing more? An example of this was when Joni Ernst, Republican from Iowa, wanted to know why the SBA was not pursuing loans under 100,000 or rather, why they were not sending them to the Treasury. The common sense answer is because loans of that type typically did not require personal guarantees and therefore they were gonna be very, very difficult to collect, but the SBA basically relented and they did end up sending them. So in that particular case, the SBA started to take more aggressive collection actions as opposed to going the other way and talking about forgiveness. So that's the first thing, political headwinds. Second, I think it's an issue of scale. I'm not sure how much research most people have done on this, but there were disaster loans at one point from Hurricane Katrina, which I believe was in 2005. A lot of those loans were eventually forgiven. There was no offer in compromise, they just forgave them. And so people are hopeful that maybe for the EIDL loan, given how bad COVID was and how a lot of businesses still haven't recovered, that maybe the federal government at some point would say, you know what, we're gonna forgive those too. But the issue that I see with that is scale. So just to give you a little context here, since the creation of disaster loans and we're talking 40 or 50 years, up until just before COVID started, they had issued, I believe the number was a total of 2.2 million disaster loans. And during the 24 months when COVID was happening, so 2020 and 2021, they issued close to 4 million loans. And so the problem is, again, scale. The number of loans that were forgiven as a result of Hurricane Katrina was very, very small. It wasn't anything close to 4 million. I should have gotten the number, but I didn't get it. But again, there were 2.2 million total for the history of the program up until 2020, and then they issued 4 million or almost 4 million. So the scale of that would be so tremendous that they'd be writing off, I believe they had issued, I think it was $390 billion, something like that. So I think it's just too large a program to forgive it across the board. And then the third reason is, if they're gonna forgive this stuff, they could also just do offer and compromise prior just to sort of wring the sponge, so to speak. So instead of just saying, hey, we're gonna forgive it for everybody, they could use common sense, and like I've been saying all along, implement the offer and compromise program, find a way to streamline it, and it would be a lot better than just forgiving all of it, because there is a portion of borrowers who can't afford these, and so why would the government forego that by just offering blanket forgiveness? So I would think that they would go to offer and compromise first before they go straight to forgiveness, and then one last point that I wanna mention is that there is a chance that they forgive these things, but not all at once. I think what's more likely is that they will send your loan to the Treasury, and if after a period of time the Treasury is unable to collect, they may forgive it and then send you a 1099, which could be a roundabout way of collecting from you, because let's say you owe $300,000 on your EIDL loan and they forgive it, there's gonna be a 1099 that's issued, which means you're gonna have $300,000 in additional income that's gonna go to the borrower, and so if your tax rate is, say, 30%, 30% of 300,000, that's a $90,000 tax bill, so even though it's not the SBA collecting, it is our federal government. So for those reasons, I am pessimistic that there will be blanket across-the-board forgiveness. There may be offering compromise, there may be forgiveness after they basically reach the end of the road as far as collections, but unfortunately, I am pessimistic of blanket forgiveness, and those are the reasons why. Thanks for checking in, and we'll see you on the next one.