Frequently Asked Questions

If you default on an EIDL loan, several things can happen in sequence:

• 60-90 days past due: Your account is flagged as delinquent. You may receive collection calls and letters.
• 120+ days: Your loan may be referred to the Treasury Offset Program (TOP), which can intercept tax refunds and federal payments.
• Collateral seizure: If you pledged collateral (required for loans over $25,000), the SBA can attempt to seize it.
• Credit reporting: The default will be reported to credit bureaus, damaging your credit score.
• Wage garnishment: In some cases, the SBA can pursue wage garnishment through Treasury.

However, the SBA has been historically slow in collections due to the sheer volume of pandemic-era loans. Many borrowers have experienced long delays before any enforcement action.

No, EIDL loans are not forgivable. Unlike PPP loans, which were designed with forgiveness built in, EIDL loans must be repaid in full.

However, there are limited options:

• Offer in Compromise (OIC): You may be able to settle the debt for less than owed if you can demonstrate financial hardship.
• Hardship accommodation: The SBA may offer modified payment plans in some circumstances.
• Bankruptcy: EIDL loans can potentially be discharged in bankruptcy, though this is complex and not guaranteed.

COVID-19 EIDL loans had the following terms:

• Interest rate: 3.75% for businesses, 2.75% for nonprofits
• Term: 30 years
• Collateral: Required for loans over $25,000 (real estate for loans over $500,000)
• Personal guarantee: Required for loans over $200,000
• First payment: Originally deferred for 12-24 months after disbursement
• Maximum amount: Up to $2 million (increased from original $150,000 cap)

Selling a business with an EIDL loan is complicated. The loan agreement typically includes restrictions:

• You must get SBA approval before selling substantial business assets or ownership
• The loan may need to be paid off at closing
• If the business is sold, the personal guarantee (if any) may still apply
• Collateral liens must be addressed in the sale

Contact the SBA servicing center and consult with an attorney before attempting to sell a business with an outstanding EIDL loan.

PPP and EIDL were both COVID relief programs, but they worked very differently:

• PPP: Forgivable if used properly (primarily for payroll). Distributed through private lenders. 1% interest rate. Designed as a grant disguised as a loan.
• EIDL: Must be repaid in full. Direct loans from SBA. 3.75% interest. 30-year term. True debt.

PPP was specifically designed to keep employees on payroll during shutdowns. EIDL was for broader economic injury and working capital needs.

If your PPP forgiveness was denied, you have options:

• Appeal: You can appeal the decision through your lender within 30 days
• Repay: The unforgiven amount becomes a loan at 1% interest
• Partial forgiveness: You may have received partial forgiveness, with the remainder converted to a loan

Common reasons for denial include insufficient documentation, improper use of funds (not enough on payroll), or errors in the forgiveness application.

The scale of PPP fraud is staggering:

• Total distributed: Approximately $800 billion
• Estimated fraud: $100-200 billion (12-25% of total)
• Prosecutions: Over 3,000 individuals charged as of 2025
• Recovery: Only a small fraction of stolen funds has been recovered

The fraud was enabled by the program's design, which prioritized speed over verification. Many loans were approved with minimal documentation review.

Yes. Once your SBA loan is in default and referred to the Treasury Offset Program (TOP), the federal government can intercept:

• Federal tax refunds (100%)
• Social Security benefits (up to 15%)
• Federal salary payments
• Federal retirement benefits
• Vendor payments from federal contracts

This is called "administrative offset" and does not require a court order. It happens automatically once you're in the TOP system.

The Treasury Offset Program is the federal government's main tool for collecting debts owed to federal agencies:

• Run by the Bureau of the Fiscal Service (part of Treasury)
• Collects debts for agencies like SBA, IRS, HHS, Education
• Intercepts federal payments before they reach you
• Does not require a lawsuit or court judgment

Once you're in TOP, any federal payment you're owed can be intercepted. The only way out is to pay off the debt, enter into a payment agreement, or successfully dispute that you owe the money.

Yes, the SBA has debt compromise programs, though success is not guaranteed:

• Offer in Compromise (OIC): Settle for less than owed based on financial hardship
• Payment plans: Negotiate affordable monthly payments
• Hardship deferment: Temporary pause on payments

To have the best chance, you need to document your financial situation thoroughly: income, expenses, assets, liabilities, and circumstances like medical issues or business closure.

Potentially, but it's complicated:

• Chapter 7: SBA loans can potentially be discharged, but personal guarantees may complicate matters
• Chapter 13: You may be able to restructure SBA debt as part of a payment plan
• Chapter 11: Business reorganization may allow for debt restructuring

However, if you obtained the loan through fraud or material misrepresentation, the debt is generally not dischargeable. The SBA has been actively objecting to bankruptcy discharges for COVID loans where fraud is suspected.

Take this extremely seriously. Federal fraud charges can result in years of prison time.

• Get a lawyer immediately. You need a criminal defense attorney experienced in federal white-collar cases. Not a business lawyer. Not your cousin who does real estate. A federal criminal defense attorney.
• Do not speak to investigators without your attorney present. You have the right to remain silent. Use it.
• Do not destroy documents. Obstruction of justice is a separate crime.
• Preserve everything: Emails, bank statements, tax returns, loan applications, receipts.

SBA fraud can result in severe federal penalties:

• Bank fraud: Up to 30 years in prison
• Wire fraud: Up to 20 years in prison
• Money laundering: Up to 20 years in prison
• False statements: Up to 5 years in prison
• Fines: Up to $1 million or twice the amount of the fraud
• Restitution: Required to repay all fraudulently obtained funds
• Asset forfeiture: Property purchased with fraud proceeds can be seized

Average sentences for COVID relief fraud have ranged from 2-10 years depending on the amount and circumstances.

Multiple agencies are involved in investigating COVID relief fraud:

• SBA Office of Inspector General (OIG): Primary investigator for SBA program fraud
• FBI: Investigates complex fraud schemes, especially larger cases
• IRS Criminal Investigation: Involved when tax fraud overlaps
• Secret Service: Financial crimes, especially involving identity theft
• DOJ Pandemic Fraud Strike Force: Coordinates multi-agency investigations
• State attorneys general: Some states have their own investigations

As of January 2026, the SBA has also contracted with Palantir to enhance fraud detection using data analytics.

Federal fraud has a long statute of limitations:

• Bank fraud: 10 years
• Wire fraud: 10 years (if affects financial institution)
• Most other fraud: 5 years

This means that PPP/EIDL fraud from 2020-2021 can be prosecuted until 2030-2031. Don't assume that because time has passed, you're safe. Investigations can take years.

You can request your SBA records through the Freedom of Information Act:

• Online: Submit through the SBA FOIA portal at foia.sba.gov
• Email: foia@sba.gov
• Mail: SBA Office of the Chief FOIA Officer, 409 3rd Street SW, Washington, DC 20416

Your request should include:

• Your name and contact information
• A clear description of the records you want
• Time period covered
• Statement that this is a FOIA request
• Fee waiver request (if applicable)

Response times vary from weeks to months. The SBA is required to respond within 20 business days but often takes longer.

You can request your own loan file, which may include:

• Your original loan application
• Documents you submitted
• Internal notes and communications about your application
• Decision documents (approval or denial)
• Modification or reconsideration records
• Disbursement records
• Collection activity records

Note: For your own records, you may also be able to request them under the Privacy Act, which has different rules than FOIA.

As of January 2025, the SBA Administrator is Kelly Loeffler, appointed by President Trump.

The SBA is an independent federal agency. The Administrator is a Cabinet-level position appointed by the President and confirmed by the Senate.

Previous recent administrators include:

• Isabella Casillas Guzman (2021-2025)
• Jovita Carranza (2020-2021)
• Linda McMahon (2017-2019)

Congressional offices can sometimes help with federal agency problems:

• Find your Representative at house.gov
• Find your Senators at senate.gov
• Call their local district offices (not just DC)
• Ask to speak with the constituent services staff
• Provide your loan number and a clear summary of the problem

Congressional inquiries don't guarantee results, but they can sometimes get cases unstuck or at least get you actual information about where your application stands.

There have been various lawsuits against the SBA related to COVID relief programs:

• Suits challenging denial decisions
• Suits over processing delays
• Suits over discriminatory practices
• Suits over collection practices

However, suing the federal government is difficult due to sovereign immunity. Most successful suits have been based on specific procedural violations or discrimination claims.

If you believe you have a legal claim, consult with an attorney who specializes in federal administrative law.