Am I personally liable for repaying an SBA EIDL loan taken as a sole proprietor with no business assets?

Lexi, Chatbot

Have you reviewed the terms of your loan agreement regarding personal guarantees?

Lexi, Chatbot

Is there anything else the lawyer should know before I connect you? Rest assured they'll be able to help with your loan agreement.

Michael M. Esq.

This is Michael, a chartered accountant with 15 years of experience — happy to assist. First and foremost, how are you?

Secondly, is there any additional information you’d like to provide before I prepare a response to your question? Thanks for laying this out clearly — it makes a big difference.

Michael M. Esq.

Let me walk you through it step by step:

1. Was your SBA EIDL personally guaranteed?
   • EIDLs under $200,000: Normally do not require a personal guarantee.
   • EIDLs over $25,000: The SBA takes a security interest (lien) in business assets. Since you didn’t have a formal business entity, the “business” was you operating as a sole proprietor. That means the lien technically attaches to assets you use in your trade or business. (31 U.S.C. § 3711)
   • So: You most likely did not sign a personal guarantee for your $116,000 loan. Instead, SBA has a blanket security interest in business assets (if any).
2. What if your business has no assets?
   • If your business doesn’t own equipment, accounts receivable, inventory, etc., the SBA’s lien is effectively on nothing.
   • They cannot automatically seize your personal home, car, or savings just because you default, unless those assets are explicitly tied to your business.
3. But since it’s in your personal name, this is where it gets tricky:
   • You said the loan was issued to you personally (as a sole proprietor). In that case, you and your business are legally the same.
   • That means SBA can pursue you for repayment, even though it’s not a “personal guarantee” in the corporate sense — because you were the borrower. (31 U.S.C. § 3720D)
4. Collections process: If you stop paying:
   • SBA will send delinquency and demand letters.
   • If unresolved, the loan is referred to the U.S. Treasury’s Bureau of Fiscal Service for collection.
   • They can offset tax refunds, garnish federal benefits, and in some cases garnish wages. (31 U.S.C. § 3716)
   • They can report the default to credit bureaus.
   • But — they do not usually seize small personal bank accounts directly unless they go through formal Treasury collection action.
5. Your CD savings
   • If the CD is in your name personally, the SBA doesn’t have a lien on it just because you took the loan.
   • However, if the loan defaults and is referred to Treasury, they can offset future tax refunds or federal payments. They could also pursue bank levies down the line, but that’s not the first step.
6. Your options right now
   • Hardship accommodation: You can contact SBA Disaster Loan Servicing and ask for a hardship repayment plan (as low as $25/month). This helps you avoid default while unemployed.
   • Deferment: In some cases, they may grant short-term deferment.
   • Compromise/settlement: If you truly can’t pay, SBA sometimes accepts less than the full balance if you make an Offer in Compromise.

Michael M. Esq.

Summary:

• You probably did not sign a personal guarantee since your loan was under $200k.
• Because you borrowed as a sole proprietor, you are still personally liable.
• SBA does not have an automatic lien on your personal CD savings, but if you default, Treasury collections could eventually impact your tax refunds and possibly levy accounts.
• Your safest move is to contact SBA Servicing now and request hardship accommodation before it escalates.