Are SBA EIDL loans personally guaranteed?

By Solomon Wiesen, editor. Updated October 2026. Editorial standards | How this site is funded

A COVID EIDL is personally guaranteed only if the loan is larger than $200,000. Above that amount the SBA required a full personal guaranty from every individual or entity owning 20% or more of the business; at $200,000 or less, nobody signed one. Collateral runs on a separate threshold: every loan over $25,000 is secured by a UCC-1 lien on the business’s assets.

The tiers below come from the SBA’s COVID EIDL terms document of September 8, 2021, the last set of rules before the program closed.

Nonprofits and loans to ESOPs were exempt from the guaranty, and where no single owner held 20%, at least one owner still had to sign. Sole proprietors get less from this than it appears. The no-guaranty tiers protect the owners of an LLC or corporation, but a sole proprietor is the borrower, and the SBA’s own description of that structure is that you can be held personally liable for the debts of the business. A $60,000 EIDL taken as a sole proprietor is your personal debt with or without a guaranty form.

The program is closed, so this is a repayment question

The SBA stopped accepting COVID EIDL applications on January 1, 2022 and stopped processing increase requests on May 6, 2022. The terms on existing loans are fixed at 3.75% for businesses and 2.75% for nonprofits over 30 years, and the SBA’s line on forgiveness is that these loans must be repaid.

What the lien does while you are still operating

The UCC-1 filing is public and works as a blanket lien on the business’s assets, so any lender you approach for new financing will find it. A bank that wants first position needs the SBA to subordinate. Selling pledged equipment, or the company itself, needs a release or a change-in-ownership approval. The SBA posts a requirement letter for each request on its COVID-era programs page and takes the completed package by email at COVIDEIDLServicing@sba.gov.

If you fall behind

The Hardship Accommodation Plan, which let borrowers pay as little as 10% of the monthly amount, ended on March 19, 2025. What replaced it is thinner: a 50% payment cut for six months, available once every five years. To qualify, the loan has to be less than 90 days past due and the business still open, with no owner in bankruptcy. Interest keeps accruing, and the SBA says the shortfall comes back as a larger balloon payment at the end of the term. You request it in the SBA Loan Portal.

I would treat it as a one-time bridge for a bad season. I would also refuse to cover a 3.75% loan payment with a merchant cash advance; the cost gap between SBA debt and an MCA is too wide. The SBA stopped accepting paper checks on October 1, 2025, so you pay in the portal or by phone at 833-853-5638.

If you default or close the business

Closing the business does not close the loan. The Congressional Research Service’s report on COVID EIDL relief says that unless the debt is discharged in bankruptcy, a defaulting borrower remains responsible for repayment even after the business has shut down. At $200,000 or less in an LLC or corporation, the government’s claim is against the company and the assets under the lien. Above $200,000, the guaranty lets it pursue you for the balance. The SBA’s inspector general noted in an August 2025 audit of COVID EIDL collections that these guaranties were unsecured, so no lien on your home came with them. An unsecured federal debt still gets collected with tools a private creditor does not have.

At 120 days delinquent, your account can be referred to the Treasury Offset Program, which withholds federal payments owed to you, tax refunds included. Loans that meet the delinquency criteria then move to Treasury’s Cross-Servicing program, and from that point the SBA says it cannot help you; you deal with Treasury at 800-289-7388. Treasury’s Bureau of the Fiscal Service spells out its powers in a FAQ for people who owe federal debt: it can order an employer to withhold up to 15% of your pay with no court order, it adds interest, penalties and collection costs, and it reports the debt to credit bureaus. You can ask for an installment agreement, and a compromise for less than the full amount is possible.

Two things that used to soften this no longer apply. The SBA once held back loans of $100,000 or less from Treasury; since March 3, 2024 it refers defaulted loans of any size. And a two-year exemption that kept COVID EIDLs out of Cross-Servicing expired on March 31, 2026. If you can see a closure coming, message the SBA through the loan portal or email the servicing center before you liquidate. If the loan has been charged off but has not reached Cross-Servicing, paying the full overdue balance and asking for reinstatement is the way back.

In New York, a business owner facing several creditors at once should also read what to do if a funder sues or freezes your account.

Paying it off early, and the taxes

The loan has no prepayment penalty. At 3.75% fixed for 30 years, though, it is probably the cheapest debt on your books, as the chart shows. I would pay down every other balance first and prepay the EIDL only to get a lien released or a guarantor freed ahead of a sale.

Interest on the loan is business interest, which the IRS lists as deductible with the caveat that the deduction “may be limited.” Keep principal and interest split out in your books. If part of the balance is ever canceled, the IRS treats canceled debt as taxable income unless an exclusion applies, such as insolvency or a bankruptcy discharge, claimed on Form 982.

If the owner dies

The SBA’s servicing page has no instructions for the death of a borrower or guarantor. It does list assumption and change in ownership among its servicing actions, which is the route for an heir who wants to keep both the business and the loan. Whether a guaranty binds an estate is a state-law question for a probate attorney.

Regular SBA disaster loans use a different number

The $25,000 collateral line was specific to COVID EIDL. For the SBA’s ongoing disaster program, 13 CFR 123.11 says the agency generally will not require collateral on an economic injury loan of $50,000 or less. If your loan came from a hurricane or flood declaration, read your own loan authorization.

Where to go next

General information, not legal or financial advice. Lender terms change; confirm them with the lender before you apply.