Whoa, That’s a Lot of Bad EIDL Loans
When the SBA revealed it had charged off $220M worth of covid-related EIDL funds before the first payment on any of those loans was even due, it suggested that things were not going to go well. Payments on just the earliest issued loans started at the end of last year and by March the SBA made a shocking disclosure. $62 billion worth of loans were already delinquent. This number is all the more alarming when put into the perspective that there were only $380B in EIDL funds loaned total. That means that 16% went bad straight out of the gate.
Oh, and this number is growing and the SBA is feeling overwhelmed to the point where they’re not even trying to collect on many loans.
“…the SBA had already decided that it would not take the most aggressive actions possible to pursue borrowers who received loans worth $100,000 or less,” the Washington Post reported.
This strategy has not been well received by Office of Inspector General Hannibal Ware. In a letter Ware wrote to SBA Administrator Isabella Guzman on September 29, he said, “SBA’s decision to cease collections risks violating the Debt Collection Improvement Act of 1996, which prohibits ending collections on fraudulent, false, or misrepresented claims, because SBA OIG and other oversight agencies are continuing to work on identifying COVID-19 EIDL fraud that may not have been identified by the agency. It is also unclear whether SBA plans to end active collections on loans for borrowers who received multiple COVID-19 EIDLs of $100,000 or less that, when combined, exceed $100,000.”
Unlike PPP loans, which if not forgiven had to be repaid in full within two years, the EIDL program extended very generous terms with a 30 year repayment schedule.
The OIG has asked the SBA to evaluate the possibility of selling a portion of its EIDL debt to maximize the return to taxpayers.Last modified: October 19, 2023