Thousands of Small Businesses Face Tax Consequences

Delinquent COVID loans on the rise

As the shadows of the COVID-19 pandemic slowly dissipates, thousands of small businesses are struggling to repay the loans they received from the Small Business Administration (SBA) to help them stay afloat. For those businesses that are unable to repay their loans, there are serious tax consequences.

Under the terms of the SBA's COVID-19 Economic Injury Disaster Loan (EIDL) program, borrowers were required to repay their loans within 30 years. However, the SBA also offered a number of loan forgiveness options, which were to reduce or eliminate the amount that borrowers owe.

Qualified loan borrowers had to have used the funds for eligible expenses, such as payroll, rent, and utilities. They also had to meet certain requirements, such as maintaining their business's full-time equivalent employees and maintaining their business's average monthly revenue.

The SBA has approved more than 3 million EIDL loans, totaling more than $280 billion. Of those loans, the SBA has forgiven more than $160 billion.

However, as of 2023 many small businesses are struggling to repay their EIDL loans. In a recent survey, the National Federation of Independent Business found that 24% of small business owners said they were not confident that they would be able to repay their EIDL loans.