SBA Cancels EIDL Loan Hardship Accommodation Program
The Small Business Administration (SBA) has effectively ended the Hardship Accommodation Plan (HAP) for COVID-19 related Economic Injury Disaster Loans (EIDL) as of March 19. The EIDL program was the predecessor to the later-forgiven Paycheck Protection Program (PPP) and, due to its strict terms, put enormous financial pressure on many of its recipients.
HAP served as a lifeline for many of the small business owners Nosh spoke with last year about the challenges they faced paying back borrowed EIDL funds. The program allowed small business owners to make reduced payments toward their loans over a six-month period with the ability to reapply up to five times.
EIDL recipients are largely unable to raise outside capital to continue funding their businesses without defaulting on their loans due to a specific clause forbidding ownership and equity transfers without SBA approval.
Due to the understaffed, bureaucratic nature of the SBA, approval processes have been slow to virtually impossible. Communication with the agency is likely to get even more difficult after 43% of its workforce has been eliminated under the Trump administration’s attack on the federal workforce.
Under HAP, borrowers could enjoy a bit of temporary relief and were required to pay just 10% of their standard payment during their first six months of participation in the program; that figure would then be increased to 50% over the second and third rounds of HAP assistance and up to 75% for the fourth and fifth rounds.
Any business that had received a loan for $200,000 or less was automatically approved for the program upon application. As of September, HAP enrollment totaled 301,000 loans for a combined sum of about $36 billion owed, per data obtained by The Business Journals.
But after the HAP portal was closed indefinitely on March 19, businesses have been barred from the reapplication process, even if they had not yet maxed out their 30-month HAP allowance. The SBA began to notify business owners via email over the past few weeks about the program’s closure, per communications from EIDL recipients viewed by Nosh.
According to a report in the Washington Business Journal, the SBA said in an email it would still provide short-term assistance to borrowers that had not previously enrolled in HAP, assuming their loans were not 120 days past due, whereby they would be sent to the Treasury Department for collection.
Prior to President Donald Trump taking office, some EIDL recipients were hopeful that the new administration would work to implement some form of forgiveness for this program, but so far there has been no movement in that direction. The SBA has become one of the top creditors for small businesses declaring bankruptcy as many have been trapped by growing debt, poor financial performance and restricted by the terms of this program.
