EIDL loans are personally guaranteed only when the loan amount exceeds $200,000. If you borrowed $200,000 or less through the COVID-19 Economic Injury Disaster Loan program, you signed no personal guarantee and your personal assets are not on the line. If you borrowed more than that, you did sign one, and the SBA can pursue you individually if the business cannot pay.
The Guarantee Threshold and What Each Tier Requires
The SBA built EIDL security in tiers tied to loan size:
- $25,000 or less: no collateral, no personal guarantee.
- $25,001 to $200,000: a blanket lien on business assets, no personal guarantee.
- $200,001 to $500,000: a blanket lien on business assets plus a personal guarantee.
- $500,001 to $2,000,000: a blanket lien on business assets, a personal guarantee, and the best available mortgage on real estate the business owns.1U.S. Small Business Administration. About COVID-19 EIDL
The gap between the second and third tier is where the risk profile changes completely. A borrower at $190,000 has exposure limited to business assets. A borrower at $210,000 has signed a personal promise to repay. That $20,000 difference in principal produced a fundamentally different legal position, and many borrowers did not focus on it at signing.2Oversight.gov. SBA’s Collection Efforts on Delinquent COVID-19 EIDLs (Report 25-23)
What a Personal Guarantee Actually Puts at Risk
A personal guarantee means you are personally liable for the debt if the business defaults. The SBA can look past the business entity and pursue your non-exempt personal property: savings, investments, wages, and other assets a court can reach.
The guarantee also survives the business. If your company closes or files for bankruptcy, that does not release you as guarantor. The SBA can pursue the guarantor separately, and a guarantor who cannot pay would need to negotiate a workout or file personal bankruptcy independently.3U.S. Small Business Administration. Offer in Compromise Requirement Letter This is the practical bite of the guarantee: the business may be gone, but the debt follows the individual who signed.
One boundary worth knowing. For loans under $500,000, the SBA generally did not take a lien on the borrower’s personal home. State homestead exemptions may still protect home equity if a guarantee turns into a judgment a creditor tries to enforce, though those exemptions vary widely from state to state.
What Happens If You Default With a Guarantee in Place
Once your payments are 120 days past due, the SBA can refer the loan to the U.S. Department of the Treasury’s Bureau of the Fiscal Service through the Treasury Offset Program.4U.S. Small Business Administration. Manage Your EIDL From there, collection tools include written demand, credit bureau reporting, wage garnishment, interception of federal tax refunds and other federal payments, foreclosure on collateral, litigation, and referral to Treasury Cross-Servicing. Treasury can also add a substantial collection surcharge to the balance.2Oversight.gov. SBA’s Collection Efforts on Delinquent COVID-19 EIDLs (Report 25-23)
If you signed a personal guarantee, every one of those tools can be aimed at you personally, not just the business entity. Wage garnishment and tax refund offset are the ones borrowers feel first.
The SBA can also charge off the remaining balance after its own collection efforts are exhausted. A charge-off is an accounting step, not forgiveness. The balance and all eligible parties on the loan, including guarantors, are referred to Treasury for continued collection.5U.S. Small Business Administration. Post-Servicing Actions
Options If You Cannot Pay
Before you fall seriously behind, the SBA offers a hardship accommodation: eligible borrowers can reduce monthly payments by 50% for six months. Your loan must be less than 90 days past due when you request it, charged-off loans do not qualify, and you can use the option once every five years.4U.S. Small Business Administration. Manage Your EIDL Interest keeps accruing during the reduced-payment window and gets added to the balance, increasing the balloon at the end of the 30-year term. It is a cash-flow bridge, not forgiveness.
For deeper trouble, the SBA has an Offer in Compromise process that allows settlement for less than the full balance, but only after all collateral has been liquidated. The SBA states explicitly that COVID EIDLs cannot be forgiven.3U.S. Small Business Administration. Offer in Compromise Requirement Letter An OIC is negotiated reduction after collateral is gone, not a fresh start.
Bankruptcy is available and EIDL debt can be discharged, but the guarantee complicates it. A business Chapter 7 or Chapter 11 filing does not, on its own, release a personal guarantor. To eliminate personal liability, the guarantor generally has to file individually. Bankruptcy damages credit for seven to ten years, so anyone considering it should talk to a bankruptcy attorney familiar with SBA debt.
Getting Released From an EIDL Personal Guarantee
The SBA has a formal process for requesting release of a guarantor as a servicing action. Requests can be submitted through the MySBA Loan Portal or by emailing COVIDEIDLServicing@sba.gov.4U.S. Small Business Administration. Manage Your EIDL Approval depends on the SBA’s assessment of the remaining risk and is not guaranteed.
Selling the business does not automatically transfer the guarantee to the buyer. Transferring an SBA loan requires approval from both the SBA and the lender, and the prospective buyer must go through a process similar to applying for a new SBA loan, including creditworthiness review and financial documentation. No collateral can be released as part of the transfer, the assumption agreement must bar further transfers, and SBA loans can be assumed only once. If the loan carried a personal guarantee, expect the SBA to require the new owner to sign one on the outstanding balance.
How Long the Government Can Come After You
Federal law gives the government six years from the date a right of action accrues to sue on a contract-based debt like an EIDL.6Office of the Law Revision Counsel. 28 U.S. Code 2415 – Time for Commencing Actions Brought by the United States The window resets, though: every partial payment or written acknowledgment of the debt restarts the six-year clock from that date.
Administrative collection through the Treasury Offset Program operates under its own rules and can keep intercepting tax refunds and federal payments regardless of the litigation statute of limitations. A federal debt of this kind can follow a guarantor for a long time, particularly when partial payments keep the clock alive.
Why the FDCPA Will Not Help You Here
The Fair Debt Collection Practices Act is the law most borrowers reach for when collection calls start. It does not apply to federal officers and employees collecting debts in the performance of their official duties.7Federal Trade Commission. Fair Debt Collection Practices Act Text Because the SBA and Treasury are federal agencies collecting on government-issued loans, EIDL collection sits outside FDCPA protections like call-time limits and mandatory debt verification.
Federal agencies still have to follow the Federal Claims Collection Standards. A borrower who believes the SBA collection process has gone off the rails can contact the SBA’s Office of the Inspector General or consult an attorney who works in federal debt collection.