Personal Guarantee on EIDL Loan: Can They Come After Me?
So you took out a COVID-19 EIDL loan back in 2020 or 2021, and at the time you were just grateful to get the funding to keep your business afloat during the pandemic. You didn’t scrutinize every document—you clicked through the application, signed what the SBA asked you to sign, and focused on surviving. Now, years later, your business is struggling or has failed, you can’t make the loan payments, and someone mentioned that you might have signed a “personal guarantee” that makes you personally liable for the debt. Your suddenly worried: Did I personally guarantee this loan? Can the SBA come after my personal assets—my house, my bank account, my wages—if the business can’t pay? What exactly did I agree to when I signed those documents? The implications of a personal guarantee are serious, and if you signed one without fully understanding what it meant, you might be facing personal financial liability for a debt that could be six figures or more.
Here’s what you need to know: **If you borrowed more than $200,000 in EIDL funds and you owned 20% or more of the business, you almost certainly signed a personal guarantee, which means YES—the SBA can come after your personal assets if the business defaults on the loan**. The personal guarantee is a separate legal contract (typically SBA Form 2162) where you personally agreed to repay the full loan amount if the business cannot. It makes you individually liable for the debt, and the SBA has extensive collection powers they can use against you personally, including wage garnishment (up to 15% of your disposable income), bank account levies, liens on your home or other real estate, tax refund offsets, and credit reporting that destroys your personal credit score. However, if you borrowed $200,000 or LESS, personal guarantees were generally NOT required—your EIDL loan was likely made only to the business entity, and the SBA’s collection options are limited to business assets, meaning they CANNOT pursue your personal finances unless there was fraud or other exceptional circumstances.
This article explains what a personal guarantee is and how it works, when personal guarantees were required for EIDL loans, what collection actions the SBA can take against you personally if you signed a guarantee, what they CANNOT do if you didn’t sign one, how to determine whether you actually signed a personal guarantee, what typically happens in practice when borrowers default, and what options you have if you’re personally liable for EIDL debt you can’t repay. If your worried the SBA might come after you personally, understanding whether you have personal guarantee liability is the critical first step.
What Is a Personal Guarantee?
A personal guarantee is a legal contract where an individual (you) promises to repay a debt if the primary borrower (your business entity—LLC, corporation, etc.) cannot or does not repay. When you sign a personal guarantee, you’re essentially becoming a co-borrower on the loan. The guarantee creates personal liability that exists separately from the business’s obligation. Even if your business is an LLC or corporation (which normally protects your personal assets from business liabilities), a personal guarantee bypasses that corporate protection and makes you personally responsible for the debt.
For SBA loans, the personal guarantee is typically documented on SBA Form 2162 (Unconditional Guarantee). This form is about as lender-friendly and borrower-unfriendly as guarantees get. It’s called “unconditional” because you waive most of the defenses you might otherwise have in challenging collection. For example, you can’t argue that the SBA should have pursued the business’s assets first before coming after you. You can’t claim that the SBA should collect from other guarantors before pursuing you. You can’t argue that the business’s failure wasn’t your fault or that you shouldn’t be held responsible because you weren’t involved in day-to-day operations. When you sign SBA Form 2162, you’re unconditionally guaranteeing the debt, which means the SBA can pursue you personally for the full amount at any time after default, regardless of what other collection options exist or what circumstances led to the default.
The guarantee doesn’t expire when you stop being involved in the business, when the business closes, or when circumstances change. It continues until the debt is fully repaid or legally discharged (such as through bankruptcy). This means that if you signed a personal guarantee in 2021 when you borrowed $300,000, and your business closed in 2024 with $250,000 still owing, YOU personally owe that $250,000 as of 2025 and beyond—the guarantee survives the business’s closure and follows you until the debt is satisfied.
It’s important to distinguish a personal guarantee from collateral. Pledging collateral (like business equipment or inventory) means the lender can seize and sell that specific property if you default, but it doesn’t make you personally liable beyond the value of that collateral. A personal guarantee, by contrast, makes you liable for the ENTIRE debt amount, regardless of what collateral exists. The SBA can pursue the collateral AND your personal assets under a personal guarantee—they’re not limited to one or the other.
When Were Personal Guarantees Required for EIDL Loans?
The SBA’s requirements for personal guarantees on COVID-19 EIDL loans were based on the loan amount:
Loans of $200,000 or less: Personal guarantees were generally NOT required. These loans were made to the business entity only. If you borrowed $150,000, $75,000, or any amount up to $200,000, you likely did not sign a personal guarantee (though there are some exceptions depending on when you applied and specific circumstances—we’ll discuss how to verify below). Without a personal guarantee, the SBA’s collection is limited to the business entity and whatever assets it owns—they generally cannot pursue your personal assets, wages, or bank accounts.
Loans over $200,000: Personal guarantees were required from all principals owning 20% or more of the business. If you borrowed $250,000, $500,000, or any amount exceeding $200,000, and you owned 20% or more of the company, the SBA required you to sign SBA Form 2162 personally guaranteeing the debt. This applies to each individual meeting the 20% ownership threshold—so if three people each own 33% of an LLC, all three would have signed personal guarantees for a $300,000 EIDL loan. The guarantee makes each signer jointly and severally liable, which means the SBA can pursue any one guarantor for the full amount—they don’t have to split collection among multiple guarantors proportionally.
There’s some confusion about the $200,000 threshold because the SBA actually offered EIDL loans up to $2 million for COVID-19 relief (and even higher amounts in some cases). But the personal guarantee requirement kicked in at $200,000. So if you borrowed $500,000, you definitely signed a personal guarantee if you owned 20%+. If you borrowed $150,000, you almost certainly did NOT sign one (unless there were special circumstances or you volunteered a guarantee for some reason, which would be unusual).
The 20% ownership requirement is important: If you owned less than 20% of the business, you generally were not required to provide a personal guarantee even if the loan exceeded $200,000. For example, if you owned 15% of an LLC that borrowed $400,000, you likely didn’t sign a guarantee—only the majority owners who held 20%+ stakes would have been required to guarantee. However, there’s nuance here: Sometimes owners voluntarily provide guarantees, or the SBA might require guarantees from minority owners in certain situations. The 20% rule is the general threshold, but your specific loan documents control, which is why verifying what you actually signed is critical.
What Can the SBA Do If I Signed a Personal Guarantee?
If you signed a personal guarantee and the business defaults on the EIDL loan (typically after missing payments for 120 days or more), the SBA can take aggressive collection actions against you personally. These actions don’t require a lawsuit first—the federal government has administrative collection powers that bypass many of the protections you’d have against a private creditor:
Administrative Wage Garnishment (AWG): The SBA can garnish up to 15% of your disposable wages directly from your paycheck without first obtaining a court judgment. Under the Debt Collection Improvement Act, federal agencies can use administrative wage garnishment to collect debts. Your employer receives a garnishment order and is legally required to withhold the specified amount from your paycheck and send it to the government. “Disposable income” is your gross pay minus legally required deductions (taxes, Social Security, etc.), so if you make $5,000/month gross and have $1,000 in required deductions, your disposable income is $4,000, and the SBA could garnish $600/month (15%). This continues until the debt is paid in full, which could be years or decades for a large balance.
Bank account levy: The SBA can freeze and seize funds in your personal bank accounts through a levy. You could wake up one morning and find your checking account frozen with all funds seized and applied to the EIDL debt. While there are some protections for certain types of funds (like Social Security deposits in some cases), most money in personal bank accounts is fair game for levy.
Tax refund offset: Through the Treasury Offset Program (TOP), the SBA can intercept your federal tax refunds and apply them to the EIDL debt. If you’re expecting a $5,000 refund, you might get a notice that it’s been offset to satisfy your defaulted SBA loan. This happens automatically once the debt is referred to Treasury—you don’t get advance warning beyond general notices about the debt.
Real property liens: The SBA can record a judgment lien against real estate you own, including your primary residence. While the SBA generally doesn’t force sale of primary residences to collect EIDL debt (that would require a lawsuit and is rare in practice), the lien attaches to the property and must be satisfied before you can sell or refinance. If you try to sell your house, the SBA’s lien will be paid from the proceeds at closing, reducing what you walk away with. If you try to refinance, the lien will show up in the title search and could block refinancing until satisfied.
Credit reporting: Defaulted EIDL debt with a personal guarantee will be reported to consumer credit bureaus (Equifax, Experian, TransUnion) under your Social Security number. This destroys your personal credit score—a large defaulted federal debt can drop your score by 100+ points, making it nearly impossible to obtain new credit cards, auto loans, mortgages, or even apartment rentals. The default remains on your credit report for seven years from the date of first delinquency.
Federal payment offset: The SBA can offset other federal payments you might be entitled to receive. This can include certain Social Security benefits in some cases (though there are restrictions and exemptions), federal employee salaries, federal contractor payments if you’re a contractor, and other government payments.
Legal action: In extreme cases or when the debt is very large, the SBA can refer the case to the Department of Justice for litigation. This could result in a lawsuit against you personally for the debt, which could add legal fees and court costs to what you owe. However, lawsuits are relatively rare for EIDL defaults—the SBA typically uses administrative collection tools rather than litigation unless there’s fraud or the amount is exceptionally large.
These collection powers are extensive and can be financially devastating. The SBA doesn’t need your permission, doesn’t need to sue you first, and doesn’t need to prove wrongdoing—if you signed the guarantee, the business defaulted, and the debt is unpaid, they can pursue these collection actions as a matter of administrative authority.
What Can the SBA NOT Do If I Didn’t Sign a Personal Guarantee?
If you did NOT sign a personal guarantee (which would be the case for loans of $200,000 or less or if you owned less than 20% of the business), the SBA’s collection options are dramatically limited. Your personal assets are protected by the corporate veil—the legal separation between you as an individual and the business entity that borrowed the money. Here’s what the SBA generally CANNOT do if there’s no personal guarantee:
Cannot garnish your personal wages. The SBA can’t touch your paycheck from a job you work outside the business. Your employment income is your personal income, and without a personal guarantee making you liable for the business’s debt, the SBA can’t pursue it.
Cannot levy your personal bank accounts. Money in bank accounts titled in your personal name is beyond the SBA’s reach if there’s no personal guarantee. The SBA can pursue the business’s bank accounts, but not yours personally.
Cannot place liens on your personal residence or other personal property. Your home, your car, your personal investment accounts—these are your individual assets, not business assets, and without a personal guarantee the SBA can’t attach liens to them or force their sale.
Cannot offset your personal tax refunds. Your individual income tax refund is your personal property, and the SBA can’t use the Treasury Offset Program to seize it if the debt is only the business’s obligation.
Cannot report the debt to consumer credit bureaus under your Social Security number. If the debt is only the business’s debt (no personal guarantee), it shouldn’t appear on your personal credit report. The default might appear on the business’s credit report (if the business entity has a credit profile), but not on yours personally.
The SBA IS limited to pursuing the business entity and its assets. They can seize business bank accounts, business equipment and inventory, business receivables, and other business property. They can sue the business entity and obtain a judgment against the business. They can place liens on business-owned real estate. But as long as there’s no personal guarantee and you haven’t committed fraud or engaged in conduct that would pierce the corporate veil, your personal assets remain protected.
There’s one important exception: If you committed fraud in obtaining the EIDL loan or you’ve engaged in conduct that would justify piercing the corporate veil (like commingling business and personal funds, not maintaining the business as a separate entity, using the business as an alter ego), the SBA might be able to pursue you personally even without a guarantee. But absent fraud or veil-piercing circumstances, no guarantee = no personal liability in most cases.
How Do I Know If I Signed a Personal Guarantee?
If you’re not sure whether you signed a personal guarantee, here’s how to find out:
Check your EIDL loan documents. Log in to the MySBA Loan Portal using the credentials you set up when you applied for the loan. Navigate to the documents section, where you should be able to view and download all the documents you signed when the loan was approved. Look for “SBA Form 2162” or any document titled “Unconditional Guarantee” or “Personal Guarantee.” If you find SBA Form 2162 with your signature, you signed a personal guarantee. If you don’t find such a document and your loan amount was $200,000 or less, you likely did not sign a personal guarantee.
Look at the loan amount. If your total EIDL loan amount (the original principal) was $200,000 or less, personal guarantees were generally not required, and you likely didn’t sign one. If the amount exceeded $200,000, guarantees were required for owners with 20%+ stakes, and you almost certainly signed one if you meet that ownership threshold.
Check your ownership percentage. If the loan exceeded $200,000 but you owned less than 20% of the business, you might not have been required to sign a guarantee even though other owners did. Review the business’s ownership structure at the time you applied for the EIDL to determine if you were above or below the 20% threshold.
Contact the SBA directly. Call the SBA’s EIDL Customer Service Center at 1-800-659-2955 or email COVIDEIDLServicing@sba.gov and ask whether personal guarantees are on file for your loan and who signed them. The SBA should be able to tell you definitively whether you’re listed as a personal guarantor.
Review any notices you’ve received. If the loan is in default and the SBA has started collection activities, the notices they send should indicate whether they’re pursuing you personally as a guarantor or only pursuing the business. Language like “as guarantor of this debt, you are personally liable” indicates a personal guarantee exists. Language that addresses only the business entity suggests there’s no personal guarantee making you individually liable.
Don’t guess or assume—verify. The difference between having a personal guarantee and not having one is the difference between facing potential wage garnishment and asset seizure versus being protected from personal collection. Get the definitive answer by reviewing your actual loan documents.
What Actually Happens in Practice When Borrowers Default?
While the SBA has extensive collection powers (especially against personal guarantors), what actually happens in practice is often less dramatic than the worst-case scenarios suggest—though it’s still serious:
Treasury Offset Program is the most common collection action. The SBA typically doesn’t file lawsuits against individual EIDL borrowers unless there’s evidence of fraud. Instead, defaulted loans are referred to the Treasury Department’s Bureau of the Fiscal Service for collection through the Treasury Offset Program. This means your tax refunds get intercepted, and if you have a personal guarantee, administrative wage garnishment might be initiated. These are administrative actions that don’t require court proceedings.
Wage garnishment happens but isn’t universal. Not every personal guarantor whose EIDL loan defaults ends up with garnished wages. The SBA prioritizes collection based on the size of the debt, the likelihood of successful collection, and available resources. If you personally guaranteed a $250,000 loan and you’re employed with garnishable wages, there’s a higher chance you’ll face garnishment than if the debt is $50,000 and you’re unemployed or self-employed with irregular income. But garnishment is a real possibility if you have steady W-2 wages.
Liens on homes are possible but forced sales are rare. The SBA can and does record judgment liens on personal residences of guarantors, but actually forcing the sale of someone’s home to satisfy EIDL debt is extremely rare. The SBA generally allows the lien to sit on the property until you sell or refinance, at which point it gets paid from the proceeds. This is still a serious problem (it blocks refinancing and reduces proceeds when you sell), but it’s less catastrophic than being forced out of your home immediately.
Credit reporting is common and damaging. If you personally guaranteed the loan and it defaults, expect it to appear on your personal credit report and to severely damage your credit score. This is one of the most consistent consequences of default with a personal guarantee.
Lawsuits are rare unless there’s fraud. Some practitioners who’ve handled hundreds of EIDL default cases report that they’ve never seen the SBA sue a borrower over a defaulted EIDL loan in the absence of fraud allegations. This doesn’t mean it can’t happen—the SBA has the legal authority to sue—but in practice, they rely on administrative collection tools rather than litigation for standard defaults. However, if there’s evidence you lied on the application, misused the funds, or committed fraud, the situation changes dramatically and you could face both civil litigation and criminal prosecution.
The bottom line: If you have a personal guarantee and you default, expect serious collection actions—especially tax refund offsets and likely wage garnishment if you have W-2 income. Also expect credit damage. But you probably won’t be sued unless the amount is very large or there’s fraud. If you DON’T have a personal guarantee, expect the SBA to pursue business assets, but your personal finances should be safe absent fraud or veil-piercing.
Can Bankruptcy Eliminate Personal Guarantee Liability?
Yes. If you signed a personal guarantee making you individually liable for EIDL debt, filing personal bankruptcy can eliminate (discharge) that liability. EIDL loan debts are not specifically excluded from bankruptcy discharge like certain other debts (student loans, some tax debts, domestic support obligations), so they can be eliminated in both Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 bankruptcy: In a Chapter 7, your non-exempt assets are liquidated to pay creditors, and then remaining dischargeable debts (including EIDL personal guarantee liability) are eliminated. If you have minimal assets that are protected by exemptions (like a modest home equity covered by homestead exemption, a reasonable vehicle, retirement accounts which are generally exempt), you might be able to discharge the EIDL debt without losing significant property. Chapter 7 is typically completed in 4-6 months, at which point your personal liability for the EIDL loan is gone. However, if you have substantial non-exempt assets (like significant home equity beyond exemptions, valuable vehicles, investment accounts), the bankruptcy trustee will seize and sell those assets to pay creditors including the SBA before discharging remaining balances.
Chapter 13 bankruptcy: In a Chapter 13, you propose a 3-5 year repayment plan where you pay a portion of your debts based on your disposable income, and remaining balances are discharged at the end of the plan. This allows you to keep assets that would be liquidated in Chapter 7. If you have significant equity in your home or other property you want to protect, Chapter 13 might be preferable. You’d make monthly payments into the plan for 3-5 years (the amount depends on your income and expenses), and at the end, any remaining EIDL balance is discharged.
Bankruptcy has serious consequences—it remains on your credit report for 7 years (Chapter 13) or 10 years (Chapter 7), it can affect employment in some fields, it can impact professional licensing in certain industries, and it’s emotionally difficult. But if you’re facing personal guarantee liability for a six-figure EIDL debt that you have no realistic way to repay, and the SBA is garnishing your wages or threatening other aggressive collection, bankruptcy might be the most practical solution. It legally eliminates the liability and stops all collection actions immediately through the automatic stay.
Before filing, consult with a bankruptcy attorney to evaluate whether you qualify for Chapter 7 (based on the means test), whether you have assets that would be seized, whether Chapter 13 is more appropriate for your situation, and what the costs and consequences would be. Many bankruptcy attorneys offer free initial consultations where they can assess your situation.
What Should I Do If I Have a Personal Guarantee and Can’t Pay?
If you’ve confirmed that you signed a personal guarantee on your EIDL loan and you can’t afford to repay the debt, here’s what you should do:
Don’t ignore it. The debt won’t go away, and ignoring SBA notices just accelerates the path to aggressive collection. The SBA will interpret non-response as an indication that you have no intention of paying, and they’ll move more quickly to administrative garnishment and other collection tools.
Contact the SBA immediately to discuss options. Call COVIDEIDLServicing@sba.gov or the EIDL servicing center and explain your situation: you personally guaranteed the loan, the business has failed (or is failing), you can’t afford the current payments, and you want to discuss options. Ask about extended repayment terms, which could reduce monthly payments by spreading the debt over more years. Ask about hardship accommodations, though many such programs have ended as of 2025. Ask whether offer in compromise is available (though this has become very restricted or unavailable for many EIDL loans). The SBA might not offer great options, but you need to know what they’ll consider before deciding on bankruptcy or other strategies.
Consult with a bankruptcy attorney. If the debt is substantial (say, $100,000+) and you have no realistic way to repay it, bankruptcy might be your option for eliminating the liability. An attorney can evaluate whether you qualify, what you’d have to give up, and whether bankruptcy makes sense for your overall financial situation.
Consider whether continued payments make sense. If you’re making token monthly payments on a $200,000 debt that you’ll never be able to pay off, you might be just throwing money away that you’ll need for bankruptcy filing fees or living expenses. If the debt is genuinely unmanageable and bankruptcy or default is inevitable, it might be better to stop paying, preserve your cash, and consult with an attorney about the path forward.
Understand the timeline. Collection doesn’t happen overnight. From when you stop paying to when wage garnishment starts is typically 6-12 months or more. This gives you time to explore options, consult with attorneys, and make informed decisions rather than panic-driven choices.
Talk to an SBA Debt Attorney Today
If you signed a personal guarantee on an EIDL loan, the SBA absolutely can come after you personally if the loan defaults—and they have powerful collection tools to do it. But even if you’re facing personal liability for debt you can’t repay, you have options. Bankruptcy can eliminate the liability, settlement might be possible in some cases, and even if you do face collection, understanding your rights can help you minimize the damage and protect essential assets and income.
Our firm helps EIDL borrowers understand and address personal guarantee liability. We review loan documents to determine whether personal guarantees exist and what your actual liability is. We negotiate with the SBA on repayment terms and settlement options when available. We represent clients in bankruptcy proceedings to discharge SBA debt. We challenge improper collection actions and protect clients’ rights during the collection process. And we advise on strategies to minimize personal financial damage when liability exists.
If your worried the SBA might come after you personally for EIDL debt, contact us today for a free consultation. We’ll review your loan documents to confirm whether you signed a personal guarantee, explain exactly what collection actions the SBA can take against you, evaluate whether bankruptcy or settlement makes sense, and advise on the strategy to protect yourself. The consultation is free and confidential, but it could be the difference between facing collection blindly and having a plan to address the liability strategically.
Personal guarantees are serious, but they’re not the end of the world. Call us now to explore your options.