Archive for month: May, 2025

During the COVID-19 pandemic, the federal government created many economic assistance programs for individuals and businesses that were facing significant financial challenges.

For individuals, this included multiple direct stimulus payments as well as enhanced unemployment benefits for those who lost their jobs either permanently or temporarily.

The federal government also created new loan programs such as the Paycheck Protection Program (PPP) through the Small Business Administration (SBA), which could be converted to grants if the money were used to fund certain expenses. 

With the pandemic a few years in the rear view mirror now, business owners may be wondering whether they can still get their loans from the SBA forgiven. We’ll discuss that topic in more depth below.

Introduction to Loan Forgiveness

During the COVID-19 pandemic, the SBA offered loan forgiveness options through programs such as the PPP. Loans equal to 2.5 times a business’ average monthly payroll cost for 2019 were available to small businesses, with a $10 million maximum amount.

To qualify to have the full amount of the loan forgiven, all borrowers had to meet specific requirements. This included using at least 60% of the total amount of the loan to cover payrolls costs. 

The remaining 40% could be used for things such as mortgage interest, as long as your mortgage was signed before February 15, 2020; rent, as long as your lease began before February 15, 2020; or utilities, as long as those services began before February 15, 2020.

The process for having your PPP loan forgiven was often complex, though, which meant that businesses needed to fully review the terms of their loan to determine whether they were eligible and what they had to do.

In most cases, they needed to submit an application to either the SBA directly or to their specific lender requesting forgiveness. 

At the start of 2025, nearly all PPP loans have been forgiven. In fact, the SBA says that 98% of all PPP loans had been forgiven. The remaining loans were either repaid for various reasons, or businesses simply haven’t applied for it yet.

Economic Injury Disaster Considerations

Another popular loan program created during the pandemic was called Economic Injury Disaster Loans (EIDL), which all small businesses that suffered substantial economic injury could apply for. This program gave businesses working capital so they could help recover from any economic losses they suffered, up to a maximum of $2 million. 

To be eligible for these loans, a business had to be located in a declared disaster area and prove they suffered economic injury. There are several factors that the SBA takes into consideration when determining eligibility, including the financial condition of the business and its ability to repay the loan.

These funds could be used to pay for operating expenses such as payroll, utilities and rent.

EIDL loans were not forgivable and had to be repaid, though the requirements varied depending on how big the loan was.

Managing Loan Repayment Challenges

Some small businesses might face continued challenges in repaying their SBA loans, whether they took out an EIDL loan or whether they didn’t qualify for full forgiveness of a PPP loan.

This could include difficulties with cash flow or debt accrual.

Until recently, the SBA offered what it called a Hardship Accommodation Plan (HAP) that was meant to help borrowers who were still experiencing financial difficulties. 

The program allowed businesses that received an EIDL loan to pay only 10% of their normal monthly payment so they could get short-term financial relief. This allowed businesses extra time to recover from economic hardship.

However, this program ended on March 19, 2025. 

As a result, any borrower who still wanted to qualify for a one-time option had to provide the SBA’s COVID EIDL Customer Service Center with a written explanation for why they needed this temporary financial hardship. 

Borrowers also could consider option options, such as refinancing or loan consolidation to help them manage debt.

Luckily, the SBA provides many resources and support so small businesses can navigate the loan repayment process so they can avoid liquidation.

Disaster Loan Forgiveness Options

While EIDL loans given out during the pandemic are no longer eligible for automatic temporary relief, you can still apply for loan forgiveness if you received a PPP loan. No new loans can be awarded under the program, but you can apply for forgiveness still if you haven’t already.

Businesses that received a loan of $50,000 or less can receive full forgiveness of their PPP loan, even if they reduced their number of full-time equivalent employees, or reduced their salaries or wages.

If you meet all of the other criteria for loan forgiveness, you don’t have to go through the complicated calculations around payroll expenses and FTE employees to qualify.

Not only that, but there is still a simplified process for applying for PPP loan forgiveness if your loan was $150,000 or less. This provides a great option for small businesses, as it reduces the amount of paperwork of applying.

To apply for PPP loan forgiveness, you have to fill out an official form that is available on sba.gov. That form also provides instructions on what other documents you have to provide as proof that you used the proceeds of the loan in a way that qualifies you for forgiveness. 

Either the lender or the SBA will review your application and must give you a written determination within 60 days of them receiving the application form. Any loan payments that you are required to repay would start at that point.

Again, if you don’t qualify for loan forgiveness under the PPP, or if you took out an EIDL loan, you still may have options for financial relief. Contact the SBA directly to find out your options, and also consider consolidating or refinancing the loan with a different lender to avoid potential disastrous consequences.

Work with an Experienced Bankruptcy Attorney if You’re Struggling to Repay

Many small businesses were hurt significantly during the COVID-19 pandemic, forcing them to turn to the federal government for economic relief. A lot of businesses took out EIDL or PPP loans because of the quick access to funds, favorable terms and ability to have at least a portion of the loans forgiven.

Even though the pandemic is over now, some businesses still face economic challenges. If their loans didn’t qualify to be forgiven, they might have trouble repaying them.

If your business finds itself in this position, it’s important to consult with an experienced bankruptcy attorney to evaluate your options.

Babi Legal Group has more than 10 years of experience in business law, debt collection, debt settlement and bankruptcy. We can help you explore your legal options if you find yourself having trouble repaying your pandemic-era loans.

For more information, please contact us today.