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Blog Covid PPP
6 min read
Updated on Oct 25, 2024

PPP vs EIDL: What Businesses Should Know in 2024

The Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) were essential in supporting businesses during the COVID-19 pandemic. However, with both programs now closed to new applications, businesses must now manage repayment obligations and explore new financing options.

The March 3, 2024 forgiveness deadline for PPP loans has passed. Unforgiven loans are now subject to collections by the U.S. Treasury and IRS, which may result in wage garnishment, withheld tax refunds, and negative credit impacts. Borrowers must act promptly to avoid these outcomes by working with their lenders on repayment plans.

EIDL loans remain in repayment mode, as they are not eligible for forgiveness (except for advance grants). For businesses experiencing financial hardship, the SBA Hardship Accommodation Plan offers temporary relief by reducing payments to as low as $25 per month for six months. Borrowers are encouraged to monitor their loan status on the MySBA Portal to prevent defaults and collections.

This article will provide a detailed look at the current state of PPP collections, EIDL repayment plans, and available financing options to help businesses manage obligations and plan for future growth.

PPP Loan Forgiveness

The March 3, 2024 forgiveness deadline for PPP loans has passed. Unforgiven loans are now subject to collections by the U.S. Treasury and IRS, and borrowers face serious financial risks, including wage garnishment, withheld tax refunds, and credit damage. Acting quickly to address outstanding loans is critical to avoid these outcomes.

Next Steps for Businesses with Unforgiven Loans

  • Check Loan Status: Log into the MySBA Portal to confirm whether your loan was forgiven. If it is not marked “paid in full,” immediate action is required.
  • Contact Your Lender: If your loan has entered collections, contact your lender to discuss repayment options or negotiate new terms.

Consequences of Default

  • Wage Garnishment and Seized Tax Refunds: The Treasury may garnish wages or withhold tax refunds to recover the debt.
  • Credit Damage: Default can negatively impact credit, limiting your ability to borrow in the future.
  • Loss of Federal Program Eligibility: Defaulting on a PPP loan may disqualify businesses from future federal programs or disaster grants.

Although forgiveness is no longer available, businesses can still refinance outstanding debt through SBA 7(a) loans, business term loans, or lines of credit to better manage their financial obligations.

EIDL Loan Repayment and Hardship Plans

As of 2024, businesses with COVID-19 EIDL loans must focus on managing their repayment obligations. These loans are not eligible for forgiveness (except for the EIDL advance grants) and require full repayment. However, the SBA has introduced flexible hardship accommodations for borrowers facing financial difficulties.

EIDL Repayment Terms and Start Dates

  • Standard Loan Terms: EIDL loans carry 30-year repayment terms with low interest rates (3.75% for businesses, 2.75% for nonprofits).
  • Deferment Periods Ended: The SBA had provided up to 30 months of deferment, but as of now, most loans have entered the repayment phase, and borrowers are expected to make payments regularly. Interest continues to accrue during this period.

Hardship Accommodation Plans

  • Eligibility and Structure: The SBA’s Hardship Accommodation Plan (HAP) allows borrowers to reduce payments to 10% of their scheduled amount (with a $25 minimum) for six months. This relief can be renewed if needed, but payments will gradually increase over time.
  • Renewal Options: Borrowers can re-enroll in the hardship plan every six months, but missed payments could trigger a return to full repayment obligations.

Managing Default and Collections Risks

  • Treasury Collections: Borrowers who remain delinquent may have their loans referred to the Treasury Department for collections, leading to potential wage garnishment and withheld federal tax refunds.
  • Impact on Credit: Although EIDL loans generally do not affect personal credit scores directly, borrowers with loans over $25,000 may have UCC filings on their business credit reports, potentially affecting future loan eligibility.

What to Do If You Are Struggling to Repay

  • Contact the SBA: Use the MySBA Portal or contact the SBA’s EIDL servicing center to explore payment options or enroll in hardship plans.
  • Explore Refinancing Alternatives: If repayment becomes unmanageable, consider refinancing through SBA 7(a) loans or private lenders offering business term loans and lines of credit.

Taking proactive steps is crucial to avoid collections and maintain financial stability. Borrowers should monitor their loan status closely through the MySBA Portal and apply for hardship accommodations if necessary to prevent default.

Exploring Financing Alternatives for 2024

As PPP and EIDL loans phase out, businesses must shift their focus to other financing solutions to manage operations, seize growth opportunities, or refinance debt. Below are some key alternatives available in today’s market, with SBG Funding offering a range of flexible, fast, and tailored options to support businesses at every stage.

1. SBA 7(a) Loans

  • Loan Amounts: Up to $5 million.
  • Usage: Best for refinancing debt, expanding operations, or purchasing equipment.
  • Repayment Terms: Up to 25 years with low interest rates.
  • SBG Funding’s Advantage: As a trusted SBA lender, SBG Funding provides expert guidance throughout the SBA loan process. With quick decisions and tailored support, SBG helps businesses efficiently access these long-term financing options.

2. Business Term Loans

  • Loan Amounts: Up to $5 million.
  • Usage: Ideal for large purchases, debt consolidation, or equipment investments.
  • Repayment Terms: Flexible terms from 1 to 5 years, with biweekly or monthly payment options.
  • SBG’s Offering: SBG Funding provides same-day approvals and next-day funding for term loans, helping businesses act quickly on opportunities. With no prepayment penalties, businesses can save on interest by repaying early.

3. Business Lines of Credit

  • Credit Limits: Up to $150,000.
  • Usage: Perfect for bridging cash flow gaps or handling seasonal expenses.
  • Repayment: 6 to 24 months, with interest charged only on amounts drawn.
  • SBG’s Offering: SBG Funding offers 24-hour approvals and no prepayment penalties on lines of credit. Borrowers benefit from flexible repayment schedules—either weekly or monthly—and the ability to increase their credit limit every 60 days, based on performance.

4. Bridge Loans for Short-Term Needs

  • Loan Amounts: Up to $1 million.
  • Usage: Great for temporary cash flow relief while waiting for longer-term financing.
  • Repayment Terms: 6 to 24 months, with early repayment discounts.
  • SBG’s Bridge Loan Advantage: SBG Funding specializes in fast bridge loans with same-day funding, ensuring businesses can maintain operations without disruption.

5. Equipment Financing

  • Coverage: Finance up to 100% of equipment costs.
  • Repayment Terms: 1 to 7 years, with interest rates starting around 3.75%.
  • SBG’s Offering: SBG Funding provides fast equipment financing approvals, ensuring businesses can purchase or upgrade essential tools without draining cash reserves.

How to Choose the Right Option

  • Large Projects? SBA 7(a) loans offer long repayment terms at competitive rates.
  • Need Cash Flow Flexibility? A line of credit provides quick access to capital for short-term needs.
  • Short-Term Solution? Bridge loans are ideal for maintaining operations while waiting for revenue streams or long-term funding.

SBG Funding offers tailored financing options, helping businesses stay agile and financially secure throughout 2024 and beyond. Whether your business needs working capital, equipment upgrades, or temporary cash flow relief, SBG’s flexible lending solutions can provide the right support at the right time.

How to Make the Right Financing Decision for Your Business in 2024

Choosing the right financing solution depends on your business’s specific needs and financial goals. With PPP and EIDL loans no longer available, it’s important to align new financing options with your operations and long-term strategy.

Assess Your Business’s Cash Flow Needs

If you need working capital to manage seasonal fluctuations or short-term cash flow gaps, a business line of credit can provide flexibility. These lines allow you to borrow only what you need and pay interest on the drawn amount, helping manage expenses without overextending.

Use Long-Term Financing for Large Investments

For large projects like expansions or equipment purchases, long-term financing—such as an SBA 7(a) loan or equipment financing—offers structured payments over several years, minimizing immediate financial strain. This option ensures you can invest in growth while keeping your cash flow healthy.

Refinance Debt to Simplify Payments

If you’re still repaying an EIDL loan, refinancing through a term loan can consolidate debt and potentially lower your monthly payments. This strategy can improve cash flow, making it easier to manage day-to-day operations and plan for growth.

Take Action if You Missed PPP Forgiveness

If you missed the March 3, 2024, PPP forgiveness deadline, contact your lender as soon as possible to avoid collections. Short-term financing, such as a bridge loan, can help cover any urgent gaps while you negotiate repayment terms or arrange refinancing.

Resolve Outstanding ERC Claims Before It’s Too Late

If your business claimed the Employee Retention Credit (ERC) but may not have been eligible, the IRS Voluntary Disclosure Program (VDP) offers an opportunity to repay the credit at a reduced rate. This program is available through November 22, 2024, allowing businesses to avoid penalties and interest by settling their claims proactively. While new ERC applications are no longer accepted, managing past claims correctly is essential to avoid future audits, collections, or eligibility issues with federal programs.

Compare Costs and Flexibility Across Loan Options

When evaluating financing, consider factors like repayment terms, interest rates, and prepayment options. Solutions with no prepayment penalties offer flexibility, allowing you to repay early and save on interest costs.

By thoughtfully aligning financing options with your business needs, you can remain agile and financially secure in 2024 and beyond. Whether you require flexible capital, long-term investment funding, or debt refinancing, making informed decisions will help position your business for success.

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