Have you ever heard of a tar baby?
In the 1946 Disney animated film “Song of the South” (now banned by Disney as “unwoke”), Brer Rabbit starts punching a figure made of coal tar by Brer Fox and Brer Bear, two of the other mischievous characters. Instead of resisting, the figure just adheres to its assailant and provides more trouble to him than the prospect of easy pickings the assailant expected. In the end, the tar baby wins by incapacitating its assailant.
This sounds just like Government loans programs that fill applicants with the expectation of “free money” but have an unhappy ending.
Key points of the article include:
- Transfer of Collections: The SBA’s decision to transfer the responsibility for collecting delinquent COVID-19 loans to the U.S. Treasury Department marks a significant shift in strategy, aiming to streamline the collection process and recover funds more efficiently.
- Impact on Small Businesses: This move may affect small businesses struggling to repay their loans, as the Treasury Department’s collection mechanisms can be more rigorous compared to the SBA’s approach. Businesses may face increased pressure to settle their debts, potentially impacting their financial stability.
- Future Implications: The decision could have long-term implications for government lending programs, potentially influencing future policy decisions on disaster relief and emergency funding for small businesses. It raises questions about the balance between supporting businesses in crisis and ensuring fiscal responsibility.
Crowley Law LLC is a law firm with deep expertise in navigating the complex landscape of government regulations and government programs. With a dedicated team of attorneys who specialize in administrative law, Crowley Law LLC offers unparalleled guidance and advocacy for businesses grappling with the challenges of compliance and regulatory issues. The firm’s proficiency extends to assisting clients in dealing with the SBA and other federal agencies, ensuring that small businesses have the support they need to thrive in a regulated environment. Whether it’s understanding the intricacies of government loans, appealing adverse decisions or navigating the complexities of federal assistance programs, Crowley Law LLC stands as a beacon for businesses seeking expert legal counsel.
Now, on to the story . . . .
In an unprecedented move, the U.S. Small Business Administration (“SBA”) has announced its decision to hand over the collection of delinquent COVID-19 loans to the U.S. Treasury Department. This decision underscores the government’s intensified efforts to recover funds extended to small businesses during the pandemic’s peak. These loans, part of the Paycheck Protection Program (“PPP”) and the Economic Injury Disaster Loan (“EIDL”) programs, were pivotal in keeping small businesses afloat as they navigated the economic turmoil caused by COVID-19.
The shift to the Treasury for collections signifies a new phase in the government’s approach to managing the fallout of the pandemic’s economic impact on small businesses.
As the SBA announced in its recent press release:
All COVID EIDL borrowers must repay their loans, but the SBA has programs to help – including expanded hardship accommodation plans. COVID EIDL hardship accommodation plans significantly lower monthly payments – sometimes as low as $25 per month – for six months, and then payments gradually increase over a multi-year period. More information for COVID EIDL hardship accommodation plans is available on the SBA website. Many borrowers can apply for a hardship accommodation plan directly through the MySBA loan portal. Once logged in, COVID EIDL borrowers can click “Loan Summaries” in the toolbar, then “Hardship Accommodation Plan” in the bottom right corner, and finally “Learn More and Enroll.”
The shift to the Treasury for collections on the EIDL loans signifies a new phase in the government’s approach to managing the fallout of the pandemic’s economic impact on small businesses. The release doesn’t give the whole picture however. Forgiven loans constitute “ordinary income” on which taxes need to be paid to the IRS. So, even loan forgiveness is not a “freebie”.
If you have an EIDL loan in default, contact us at (908) 540-6901 or [email protected] We’re here to help.
how-the-us-treasury-department-collection-of-delinquent-covid-loans-affects-your-business
