EIDL loan collections are reaching owners of pandemic Economic Injury Disaster Loans when missed payments are referred to the U.S. Treasury, which adds a 30% fee and can garnish wages or offset tax refunds. Bloomberg Law reported that more than 1,800 companies have filed for bankruptcy this year listing the Small Business Administration as a major creditor, surpassing figures for each of the last five calendar years, according to BankruptcyData.
Key Takeaways
- Treasury adds a 30% fee when a defaulted EIDL goes to collections.
- Loans over $200,000 required owners to sign personal guarantees.
- More than 1,800 firms listed the SBA as a major bankruptcy creditor.
- Hardship relief now cuts payments 50% for six months, once every five years.
How EIDL Loan Collections Reach the Treasury
Miss a payment and the loan is delinquent, according to NerdWallet’s guide. The SBA will send payment requests by email, direct mail, or the MySBA Loan Portal, usually about every 30 days, while interest accrues. After 120 days of nonpayment, the loan is in default and the SBA will send it to the Treasury, which adds a 30% collection fee. A $100,000 balance becomes $130,000.
To collect, the Treasury can:
- Garnish wages.
- Withhold or offset tax refunds.
- Withhold Social Security income.
- File a lawsuit.
- Seize assets if a guarantee or collateral applies.
A default can be reported to commercial and consumer credit bureaus. If it appears on a consumer credit report, NerdWallet says it may take up to seven years for the credit score to recover. A default can also preclude future SBA financing and government contracts.
Guarantees, Collateral, and Loan Size
The 2020 CARES Act program let businesses borrow up to $2 million over 30 years at a 3.75% fixed rate, with the option to defer payments for 30 months. Bloomberg Law described a $380 billion program reaching nearly 4 million companies. The loans were not forgivable.
| Loan size | What the SBA required | Collection exposure |
|---|---|---|
| More than $25,000 | Blanket UCC lien on business assets | Business assets can be claimed |
| More than $200,000 | Personal guarantee plus collateral | Personal assets, wages, and refunds |
The SBA generally seizes business assets first and pursues the owner only if they fall short, though it is not required to do so. Closing does not end the debt. Failing to notify the SBA could be a breach of contract, and breaking approved-use or record-keeping terms could let the SBA pursue an owner even without a personal guarantee.
Charge-Offs, Bankruptcy, and Narrower Relief
By the end of 2024 the SBA had charged off 370,000 EIDL loans worth about $47 billion and was trying to collect on another $14.7 billion in loans delinquent for at least three months, an August inspector general report cited by Bloomberg Law said. A November 2024 Congressional Research Service report said the agency had recognized a loss on loans totaling $78 billion.
Colorado bankruptcy attorney Mike Wink told Bloomberg Law he gets multiple calls every single day from people across the country about these EIDLs. Orlando attorney Robert Branson of Branson Law PLLC said that for borrowers over the $200,000 threshold, “the only option I can give them is bankruptcy at this point in time.”
Bloomberg Law reported that in March the SBA ended accommodations cutting typical payments by 90% for up to six months, with the option to reapply. Relief is still six months, but payments are reduced by only 50%, and the option is available once every five years. Tax attorney Rebecca Sheppard of Frost Law said, “In March there was a huge uptick.”
Steps Before Payments Fall 90 Days Behind
Email the SBA or send a message through the MySBA Loan Portal. Those details belong in the email: the loan number and the reason in the subject line, and the loan number, reason, business name, applicant name, and contact information in the body. Eligible borrowers may cut payments by up to 50% for six months, once every five years. Interest still accrues, and a larger balloon payment is due at the end of the loan.
To qualify, the loan must be:
- Fewer than 90 days past due.
- Active, and not charged off at about 180 days past due.
- Explained as a temporary hardship.
You may negotiate a longer term or lower payment with proof of significant hardship, and you will likely want a business attorney to assist. If you close, notify the SBA and keep loan documents, statements, and correspondence with the SBA or the Treasury.
What the Collection Shift Means for Owners
An August inspector general report cited by Bloomberg Law said the SBA did not perfect its security interest on borrower deposit accounts, conduct post-default site visits, report all delinquent obligors to credit bureaus, or refer debts to the Justice Department for litigation. The agency has drastically cut its staff under the Trump administration, and press officers did not respond to questions about the program or debt relief. Wink told Bloomberg Law he thinks there is a lot to come.
NerdWallet describes inflation, rising costs, supply chain disruptions, and tariffs as pressures that make repayment harder. That backdrop also appears in coverage of the Fed rate hold and small-business borrowing. Reach the SBA before a loan is 90 days past due, and get counsel if a guarantee or a closure could make the debt personal.
