SBA Won't Sell EIDL Loans

Summary

The Small Business Administration (SBA) has decided to manage its COVID Economic Injury Disaster Loan (EIDL) portfolio in-house rather than selling it, despite pressure from lawmakers. This decision is expected to save taxpayers from a potential $120 billion loss. The SBA's analysis shows that managing the loans internally will allow for more funds to be recouped compared to a sale. The current default rate for these loans is estimated at 37%, and borrowers who default may face consequences such as wage garnishment and loss of access to future federal aid. The SBA has been innovative in offering modified payment plans, such as the Hardship Accommodation Plan, to assist struggling businesses. Additionally, the SBA has opened a center in Fort Worth to advise and service EIDL borrowers. This move is seen as positive news for small business owners, especially considering the high delinquency rates.

Takeaways

• 🏦 The SBA has decided to keep and manage all nearly 4 million COVID EIDL loans, avoiding a potential $120 billion loss.
• 🚫 If a business borrower fails to repay their EIDL loan, they will not be able to access federal aid again.
• 📉 The estimated default rate for these EIDL loans is alarmingly high, at around 37%.
• 💼 Lawmakers had recommended the SBA sell its COVID EIDL loan portfolio, but the agency has ultimately decided against it.
• 💻 The SBA has opened a center in Fort Worth dedicated to advising and servicing EIDL borrowers.
• 💡 The SBA's analysis suggests that managing the EIDL portfolio in-house will allow for more funds to be recouped compared to selling it.
• 📉 Selling the loan portfolio would require Congress to appropriate additional funds to cover taxpayer losses due to steep discounts demanded by private buyers.
• 📈 The SBA has been innovative in offering modified payment plans to help struggling businesses, such as the Hardship Accommodation Plan.
• 🔒 Borrowers on the Hardship Accommodation Plan can make partial payments for up to 2 years, temporarily easing cash flow but increasing long-term debt.
• 🔑 The SBA's my SBA loan portal, launched over a year ago, could still improve its registration and login process to better assist borrowers.
• 📝 There is an ongoing petition with over 6,000 signatures supporting further EIDL relief and forgiveness, which can be found at e.id.me.

Q & A

Why did the SBA decide to manage the EIDL (Economic Injury Disaster Loan) portfolio in-house rather than selling it?

The SBA decided to manage the EIDL portfolio in-house after analyzing that doing so would allow it to recoup more funds compared to selling it. Selling the portfolio would have cost taxpayers over $120 billion and required Congress to appropriate up to $124 billion, potentially hurting small businesses currently paying down their COVID EIDL loans.

What is the estimated default rate on the COVID EIDL loans?

The estimated default rate on the COVID EIDL loans is in the double digits, with some sources suggesting it is as high as 37%.

How does the high default rate impact the value of the loan portfolio if sold to the private market?

The high default rate would lead to steep discounts on the loan values by the private market, which is why the federal government's accounting principles would require Congress to appropriate funding to cover any taxpayer or government loss if the portfolio were sold.

What is the Hardship Accommodation Plan mentioned in the script?

The Hardship Accommodation Plan allows EIDL borrowers to make partial payments for up to 2 years, with many cases allowing as low as 10% of the normal monthly EIDL payment. This plan is designed to help with near-term cash flow but increases the total amount owed in the long term.

How many EIDL borrowers are currently on the Hardship Accommodation Plan?

There are 169,000 EIDL borrowers on the Hardship Accommodation Plan.

What are the potential consequences for business borrowers who fail to pay back their EIDL loans?

If a business borrower fails to pay back their EIDL loan, they will not be able to access federal aid again and could face consequences such as wage garnishment.

What improvements has the SBA made to help borrowers manage their EIDL loans?

The SBA has been innovative in allowing people to get on modified payment plans and has launched the My SBA loan portal to improve the registration and login process for borrowers to check the status of their loans.

What is the current status of businesses making payments on their EIDL loans?

According to the SBA, nearly 74% of businesses are making their payments or are still on track to pay.

What is the Skip Dashboard and how can it help small business owners?

The Skip Dashboard is a platform that lists various grants and loans, including $10,000, $20,000, and $25,000 grants, which can help small business owners secure funding for their businesses.

What is the petition mentioned in the script and what is its purpose?

The petition mentioned in the script has over 6,000 signatures and supports further EIDL relief and forgiveness. It is aimed at helping businesses that are struggling with the high default rates on their EIDL loans.

How can small business owners access the grants and loans listed on the Skip Dashboard?

Small business owners can access the grants and loans by visiting helloskip.com or by downloading the Skip app.