COVID EIDL FAQs: 3 Questions Business Owners Keep Asking

Can a COVID EIDL loan be forgiven? Is an Offer in Compromise available? Could bankruptcy eliminate the debt? These are three of the most common questions we hear from business owners facing COVID EIDL repayment challenges. While each addresses a different possibility, they often stem from the same concern: What happens if my business can no longer afford its EIDL loan?

In this video, EIDLexit addresses all three questions and explains why the answers may depend on the borrower's circumstances.

Can COVID EIDL Loans Be Forgiven?

No. Unlike Paycheck Protection Program (PPP) loans, COVID EIDL loans are not eligible for loan forgiveness. The SBA confirms that COVID EIDL loans must be repaid.¹

Some confusion comes from the difference between COVID EIDL loans and EIDL Advances, which did not require repayment. These were separate forms of pandemic assistance.

Our COVID EIDL Forgiveness Guide explains these distinctions and discusses considerations for borrowers experiencing financial hardship.

Is an Offer in Compromise Available for COVID EIDL Loans?

No. Under the SBA's published guidelines, COVID EIDL loans are not eligible for the agency's standard Offer in Compromise process.

Although this process may be available for certain other SBA loans, borrowers should not assume those options apply to COVID EIDL debt.

Will Bankruptcy Eliminate My EIDL Obligations?

Bankruptcy may discharge or restructure certain EIDL obligations, but the outcome depends on the circumstances.

Important considerations include who borrowed the funds, the type of bankruptcy filed, the business structure, and whether a personal guarantee exists.

For example, an individual's bankruptcy does not automatically eliminate a separate business entity's obligations. Likewise, a business bankruptcy does not necessarily discharge an owner's personal guarantee.

For additional context, read What Happens If You Don't Pay Back an EIDL Loan?.

What Business Owners May Be Overlooking

In our conversations with business owners, forgiveness, settlement, and bankruptcy often come up as possible ways to address the same financial challenge. However, they involve different rules and considerations.

The outstanding loan balance is only one part of the picture. Other important questions include:

• Is the business still operating? A business experiencing temporary financial difficulty may face different considerations than one preparing to close or already dissolved.
• Who is obligated under the loan? The business structure, loan documents, and any personal guarantee can affect liability.
• What has happened to business assets? Selling, transferring, or liquidating assets may involve SBA requirements that need to be addressed.

These details matter because decisions about business operations, closure, and asset disposition can intersect with SBA loan obligations.

Our article, Why the DIY Approach Can Be Risky When Dealing With an SBA EIDL, explores why coordinating these decisions is important.

Understanding Your Next Steps

At EIDLexit, we help business owners navigate SBA EIDL obligations, including financial hardship, business closure, and loan resolution considerations.

Schedule a free consultation with EiDLexit to understand your situation and your options.

If you're uncertain about your options, contact EIDLexit to schedule a free, no-obligation consultation.

Citation:

1.  SBA - SBA Confirms EIDL Loans May Not Be Forgiven