SBA Payment Assistance is Diminishing. Learn How Bankruptcy Might Help Small Businesses

As the COVID EIDL Hardship Accommodation Plan (HAP), ends there no direct long-term solutions from SBA for small businesses. Reorganizing through Chapter 11 Subchapter V might be the best solution for your business.

In a significant policy shift, the U.S. Small Business Administration (SBA) officially ended its Hardship Accommodation Plan (HAP) for COVID-19 Economic Injury Disaster Loans (EIDL) on March 19, 2025. This abrupt decision, given with little warning, blindsided millions of small businesses that relied on the program to manage their pandemic-related debt. The end of the HAP means that businesses will no longer have the option to reduce their monthly payments, potentially leading to increased financial strain and a higher risk of default.

Although the pandemic is considered officially over, many businesses are still struggling with the aftermath of the economic disruption that followed in its wake. Other current economic uncertainties, such as potential tariff increases, inflation, supply chain issues, and changes to SBA policies, are placing immense financial pressure on many small businesses. Resuming full payments on EIDL loans will exacerbate that pressure.

Understanding COVID-19 EIDL Loans

The COVID-19 EIDL program was established under the CARES Act in 2020 to provide low-interest, long-term loans to small businesses and nonprofit organizations to help them recover from the economic impacts of the COVID-19 pandemic.

These loans offered up to $2 million with a 30-year term and a fixed interest rate of 3.75% for for-profit businesses and typically have a lien against the businesses’ assets. Unlike Paycheck Protection Program (PPP) loans, another CARES Act program, EIDLs are not forgivable and must be repaid in full.

To alleviate immediate financial burdens, the SBA initially offered a 30-month deferment period on payments. However, interest continued to accrue during this period, resulting in larger balloon payments at the end of the loan term.

Termination Of HAP

A few assistance options are still available through SBA, but they are severely limited and only offer short term relief. Approved borrowers may qualify for a one-time reduced payment of 50% of their original payment amount for six months. Interest will continue to accrue during the six-month period, which could result in an even higher balance later. This isn’t a long term solution.

Bankruptcy Might Be The Best Option If Your Business Struggles With New Higher Payments

If you are at risk of default or have already defaulted on an SBA loan, contact our office to see if Chapter 11 Subchapter V might benefit your business. Our firm has assisted a variety of businesses, from medical practices to construction companies in successfully restructuring SBA loans. In bankruptcy, secured loans such as the SBA can be “valued” down to the current value of the assets. For example, we successfully assisted a contracting business that had an SBA loan of over $2,000,000.00. In the Chapter 11 case, we were able to reduce the “secured” portion of the loan down to a little over $112,000.00, which was the current value of the business assets. The Chapter 11 plan reduced the monthly payment from $9,100.00 down to $467.00 per month at the same terms, 3.75% interest over a 30-year term. The difference of the secured value and the total loan is treated as a general unsecured creditor and receives a pro rata distribution, with the difference being discharged.

In other cases, when the SBA loan was issued after another secured lender that encumbers all of the business assets, the SBA’s lien can be stripped off in bankruptcy. In these cases, the SBA is treated as a wholly general unsecured creditor and only receives a pro rata distribution along with other unsecured creditors, often only receiving a fraction of the total debt.

We cannot promise or predict the outcome of any case. Each case has its own determining factors, such as value of assets, types of debts, and projected income to mention a few.

Bankruptcy Can Be Complicated. We Are Here To Help.

The type of bankruptcy that may be the best for you depends on whether your business is still operating, whether you guaranteed the loan personally or as a business entity, and whether your business could remain viable if debts are restructured.

One of the most important benefits of filing for bankruptcy is the “automatic stay” that halts all collection activities, including those for SBA EIDL loans, providing businesses struggling with debt a much-needed breathing space. 

The end of the SBA’s EIDL HAP program has battered many small businesses that are still recovering from the pandemic economy and dealing with the current uncertainty in the economy. Bankruptcy may be a way to keep your business afloat while managing your debt. If you are struggling to repay your EIDL loan, call us. We can help you. Although we cannot promise the outcome of your case, our team of experienced bankruptcy attorneys will assess your situation and determine whether a bankruptcy is in your best interest and, if so, which type.

Branson Law is here to guide you through the bankruptcy process and help you protect your financial future. By taking proactive steps now, you can ensure you have access to the debt relief you need. Don’t wait until it’s too late—start the process today to secure a more stable financial situation tomorrow. Contact us today to protect your business and its employees, your income, and your future.  

We are located in Orlando, Florida, and handle bankruptcy cases throughout the State of Florida. Call us today if you live, own property, or operate a business in Florida and cannot manage your debt. Our goal is to help you understand your options. Our goal is to help you so you can sleep at night.