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.

Outlines

00:00

🏦 SBA's Decision to Retain EIDL Loan Portfolio

The Small Business Administration (SBA) has decided to retain and manage its COVID Economic Injury Disaster Loan (EIDL) portfolio rather than selling it off. This decision comes after an analysis that showed managing the loans in-house would allow for more funds to be recouped compared to selling them. The SBA is facing pressure from lawmakers but has determined that selling the portfolio would result in a $120 billion loss and require additional congressional appropriations. The EIDL program has a high delinquency rate, estimated at 37%, which has led to concerns about the financial burden on taxpayers. The SBA's retention of the loan portfolio is expected to benefit small business owners, especially those struggling to repay their loans. The agency has also been innovative in offering modified payment plans to help borrowers manage their repayments. However, there are still challenges, such as difficulties with the mySBA loan portal's registration and login process, which can hinder borrowers from accessing payment plans. The SBA has also opened a center in Fort Worth dedicated to advising and servicing EIDL borrowers.

05:01

📊 Impact of SBA's EIDL Management on Borrowers and Taxpayers

The SBA's decision to manage its EIDL loans internally is expected to have significant implications for both borrowers and taxpayers. For borrowers, the decision means that they will not be able to access federal aid if they fail to repay their EIDL loans, highlighting the importance of loan repayment. Additionally, defaulting borrowers could face consequences such as wage garnishment. The agency's analysis suggests that managing the loans in-house will be more financially beneficial than selling them, potentially reducing the burden on taxpayers. The SBA has reported that nearly 74% of businesses are either making payments or are still on track to pay back their loans. The video also mentions a hardship accommodation plan that allows borrowers to make partial payments over a period of up to two years, which can help with short-term cash flow but may increase the total amount owed in the long term. The presenter invites viewers to share their thoughts on the SBA's decision and to consider signing a petition for EIDL relief, which can be found at eid.me. Furthermore, the video promotes the skip dashboard at helloskip.com and the skip app, which lists various grants and loans that can assist businesses financially.

Keywords

💡EIDL

EIDL stands for Economic Injury Disaster Loan, which is a program by the U.S. Small Business Administration (SBA) to provide financial assistance to small businesses and non-profits that are experiencing economic hardship due to a declared disaster. In the video's context, it discusses the implications of managing EIDL loans and the potential consequences for borrowers who fail to repay them.

💡Loan Portfolio

A loan portfolio refers to a collection of loans that a financial institution holds. In the video, the term is used to describe the SBA's COVID EIDL loans, which are being managed in-house rather than being sold off. This decision is significant as it affects how the loans are serviced and the potential for recouping funds.

💡Delinquency Rates

Delinquency rates indicate the percentage of borrowers who are behind on their loan payments. The video mentions that there are 'extremely high delinquency rates' for EIDL loans, which is a critical factor in the SBA's decision-making process regarding the management of these loans.

💡Hardship Accommodation Plan

The Hardship Accommodation Plan is a program by the SBA that allows EIDL borrowers to make partial payments for a certain period, easing their financial burden temporarily. The video discusses this plan as a measure that has been implemented to help struggling businesses manage their loan repayments.

💡Default Rate

The default rate is the percentage of loans that are not repaid as agreed upon by the borrower. The script mentions an estimated default rate of '37%' for these loans, which is a significant figure that influenced the SBA's decision not to sell the loan portfolio.

💡Federal Aid

Federal aid refers to financial assistance provided by the federal government. The video script warns that businesses failing to repay their EIDL loans may not be able to access federal aid again, highlighting the importance of loan repayment for future eligibility.

💡SBA

SBA stands for the Small Business Administration, a U.S. government agency that provides support to small businesses. In the video, the SBA's decision-making process regarding the EIDL loan portfolio and its management is a central theme.

💡Loan Servicing

Loan servicing involves the administration of loans, including collecting payments, maintaining records, and handling customer service. The video discusses the SBA's decision to manage the EIDL loans in-house, which means they will handle the servicing of these loans.

💡Interest Waiver

An interest waiver is a temporary or permanent reduction in the interest rate on a loan. The video suggests that an interest waiver could be a form of relief for EIDL borrowers, allowing them to focus their payments on the principal amount.

💡Forgiveness

Forgiveness, in the context of loans, means that the remaining balance of the loan is canceled and does not need to be repaid. The video raises the possibility of full forgiveness as a potential form of relief for EIDL borrowers.

💡Skip Dashboard

The Skip Dashboard is a platform mentioned in the video that lists various grants and loans available for businesses. It is used as an example of a resource where businesses can find financial assistance, such as the '$10,000 Grant' mentioned in the script.

Highlights

The SBA has decided to keep and manage all nearly 4 million COVID EIDL loans.

Managing EIDL portfolio in-house will allow SBA to recoup more funds compared to sale.

SBA aims to avoid a $120 billion loss by not selling the COVID EIDL loan portfolio.

High delinquency rates of EIDL loans, estimated at 37%.

SBA's decision not to sell the EIDL loan portfolio is influenced by the potential for steep discounts demanded by private market buyers.

SBA has been innovative in allowing businesses to get on modified payment plans.

Hardship Accommodation Plan allows borrowers to make partial payments for up to 2 years.

The SBA loan portal could improve its registration and login process.

SBA has opened a center in Fort Worth dedicated to advising and servicing EIDL borrowers.

Nearly 74% of businesses are making payments or are on track to pay back their EIDL loans.

Business borrowers who fail to pay back their EIDL loans will not be able to access federal aid again.

Defaulting on EIDL loans could lead to wage garnishment and other consequences for borrowers.

SBA's management of the EIDL portfolio in-house is expected to recoup more funds.

There is a petition with over 6,000 signatures supporting further EIDL relief and forgiveness.

SKIP dashboard lists various grants and loans available for businesses, such as the SKIP 10K Grant, Verizon grants, and more.

A $10,000 grant is available for application on the SKIP platform.

Transcripts

here's the problem if a business

borrower fails to pay back their eidl

loan they will not be able to access

federal aid again the agency's analysis

found that managing the eidl portfolio

inhouse will allow it to recoup more

funds compared with the sale the SBA is

keeping its covid eidl loan portfolio to

avoid $120 billion haircut despite

pressure from many lawmakers the SBA has

agreed to keep and manage all the nearly

4 million covid eidl loans that's good

news for many of you especially given

the extremely high delinquency rates in

this video I'm going to talk about this

article that has new information

especially relevant if you are a small

business owner and if you're a CO eidl

loan borrower as always thanks for

tuning in and subscribing be sure to

watch until the end and if you want

grants for your business there's a bunch

of $10,000 $20,000 and $25,000 grants

all listed on the skip dashboard

including the skip 10K Grant Verizon

grants venmo grants us Chamber of

Commerce into it Comcast eBay and so

much more all at hellos skip.com or on

the skip app in the last DL video we did

I talked about how the SBA was recalling

all covid eidl loans that were at the

treasury instead of the treasury

managing collections delinquency the SBA

has decided to do it but that was only

part of the story because there was

still a chance that the SBA may sell its

covid eidl loan portfolio that was a

recommendation from lawmakers back in

2023 while after years of deliberation

the SBA has decided it will not sell the

co eidl loan portfolio one that has

estimated default rates in the double

digits it's a long awaited decision that

arrives after Republican lawmakers have

a long call called for a sale but the

SBA about a week ago told told the chair

of the house committee on a small

business representative Roger Williams

that selling the eidl portfolio would

cost taxpayers upward of

$121 billion require Congress to

appropriate up to 124 billion and likely

hurt small businesses currently paying

down their covid eidl loans there's an

incredible default rate with these loans

it's estimated at

37% that means anyone in the private

Market who would buy the loan portfolio

would demand steep discounts on the loan

values and if that happened the federal

government's accounting principles would

require that Congress appropriate

funding to cover any taxpayer or

government loss so in short the SBA is

going to manage these loans I'd love to

hear if you think that's positive or

negative you know we've been covering

covid eidl loans since March 2020 that's

over 4 years now we've seen every single

change the SBA has made as it relates to

this nearly half a trillion dollars that

was given out to save small businesses

often when businesses had no other

options and with that

37% projected default rate it's clear

businesses are still struggling that's

why we have our petition with over 6,000

signatures to support further eidl

relief and forgiveness that's at e

id.me if you want to take a look at what

people are saying or sign it yourself

and to the sba's credit they have been

Innovative in terms of letting people

get on modified payment plans we covered

this first in November 2022 the hardship

accommodation plan we're now a year and

a half into that and thanks to the sba's

communication and in large part to many

of our videos because the SBA decided to

never put out a press release on the

hardship accommodation plan there's

169,000 eidl borrowers on the hardship

accommodation plan which allows

borrowers to make partial payments 6

months at a time up to 2 years in many

cases you can pay as low as 10% of your

normal monthly eidl payment so if you

were supposed to pay $11,000 a month you

could reduce that to $100 a month

temporarily helping you with near-term

cash flow but increasing what you owe in

the longterm that's what many of you are

facing right now personally I think the

SBA can continue to make improvements

here for example the my SBA loan portal

which launched a little over a year ago

can still improve its register and login

process to allow more people to be able

to sign in and see what the status of

their loans is it comes down to details

for example when you click sign in

you're not prompted to the signin page

but to the register of your account page

and the SBA require Ires around a 16

digigit password which if you're like

most people you can't remember that very

easily so you have to go through a

password reset flow every time you want

to log in and if you mess up a few times

you'll get locked out and you have to

call the SBA instead well we know that

it's friction like that that can prevent

people from getting on a payment plan

especially some of the most vulnerable

business owners here but so instead of

selling its portfolio the SBA has open a

center in Fort Worth that's dedicated to

advising and servicing eidl borrowers at

the start of 2024 the SBA said nearly

74% of businesses are making their

payments half paid or are still on track

to pay here's the problem if a business

borrower fails to pay back their eidl

loan they will not be able to access

federal aid again ever on top of that

borrowers who default could see their

wages garnished among other consequences

the agency's analysis found that manag

managing the eidl portfolio inhouse will

allow it to recoup more funds compared

with the sale what do you think about

this decision by the SBA to manage it

all themselves are you confident that

they can recoup some of the costs so

there won't be an additional burden on

taxpayers or are you still holding out

hope for eidl relief maybe that's waving

interest allowing you to put all of your

payments towards the principal maybe

it's full forgiveness let me know in the

comments and if you want to sign the

petition Go to e id.me and if you want

to see dozens and dozens of Grants or

other lowest loans that can help your

business go to the skip dashboard hellos

skip.com or download the skip app

there's a $10,000 Grant due today that

you can apply for in a few seconds I'll

leave the link above most importantly

stay well stay healthy and I'll see you

in the next video