EIDL Loans Over $200,000
How the Signed Personal Guarantee Is Enforced

A signed guarantee places the owner beside the company as obligor.

An owner reviewing an EIDL above $200,000 should obtain the actual guarantee with any written demand before assuming that closure, a reduced balance, or the presence of collateral decides individual exposure. Seldom does the file contain a shortcut around those two papers.

The Guarantee Instrument and the Owners Bound

In its SBA inspector general audit of delinquent COVID EIDL collection, the agency watchdog described guarantees required from owners holding at least 20 percent of the business for loans exceeding $200,000. Nonprofit organizations and employee stock ownership plans were excepted from that requirement.

The report described the guarantee as an unconditional obligation to pay the full loan upon written demand. The ownership percentage identifies who signed. The instrument states what the signer owes, without apportionment by share.

Retrieve the signed instrument with amendments and confirm the identity of each guarantor rather than assuming every person tied to the business signed the same undertaking. A current balance below the threshold does not itself release a guarantee obtained when the loan was larger. This is the paper that follows the owner home.

The company closes. The signature remains.

Demand Terms Before Collection

Preserve the complete notice with the date received. Identify the amount sought, the person addressed, and the asserted basis for the demand. Before submitting personal financial statements, before accepting a new payment promise, ask counsel to review the existing obligation and the purpose of the information requested.

Compare the balance claimed with the loan record and retain proof of payments made. A disagreement about an entry should rest on the transaction rather than on an estimate of what remains. Identify any release, modification, or other document that may affect the claim, since a conversation described as an accommodation should not be treated as a release without examining its terms.

Where several owners signed, identify each instrument with any separate representation. One owner discussion with a collection representative should not be assumed to bind the others. Counsel should ensure the record shows who can approve a proposal and whose obligation it would resolve.

There was nothing in the closing package that explained what the signature would cost. There rarely is.

Collection Paths After Default

SBA COVID era loan servicing guidance on delinquency and Treasury referral states that an account may be referred to the offset program after reaching 120 days of delinquency and that loans transferred to cross servicing are no longer serviced by SBA. Demand establishes the claim, servicing determines the forum, and collection selects the tool from those the referral allows.

Treasury background guidance on administrative wage garnishment describes an order directing a nonfederal employer to withhold up to 15 percent of disposable pay for a delinquent nontax debt owed by the individual, issued without a court order under federal standards, where the debtor receives advance notice with an opportunity to inspect records, to agree a repayment schedule, and to seek a hearing on the debt, the amount, or hardship terms (which defenders of aggressive collection will describe as routine efficiency), and where a timely hearing request must precede any order to the employer.

A payment discussion does not pause a garnishment clock.

The audit noted that the agency did not perfect interests in borrower deposit accounts through control agreements in the practices examined, which shows why a filing description alone resolves no perfection question, and it recorded that the agency pursued no litigation independent of the Justice Department. Agencies know exactly how few owners read these instruments. They count on it.

What the owner discloses, or withholds, in response to a demand will shape the next step. Any statement about assets, even briefly offered, can fix the amount in dispute, and counsel should ensure the response corresponds to the claim actually made.

Papers That Answer a Demand

Keep business and personal budgets separate while showing any relationship between them. A combined total can conceal the source of funds behind a proposal that looks more certain than it is.

The demand was proper. It was also premature. Simply state the source of every proposed dollar and the condition on which it depends. Identify the forum the agency has actually invoked before choosing the reply, since each process answers to a different office.

Private Obligations and Independent Counsel

Delancey Street offers a free confidential initial review of business debt concerns, with emphasis on MCA obligations. An owner with private financing beside a federal guarantee can ask which accounts fall within the services confirmed for the business.

The company provides debt settlement services and coordinates legal matters with independent counsel. It is not a law firm. Advice on a federal guarantee requires the proper legal engagement, and an engagement to negotiate an advance should not be assumed to answer a federal demand.

We review the instrument, identify the defenses, and construct a reply that addresses both the amount claimed and the forum in which it is claimed. The guarantee sits in the file the way a spare key sits in a drawer: unnoticed until the lock changes. Resist the urge to ignore an unfamiliar agency letter because no lawsuit appears filed, since different processes require different answers and a letter can later be used against the guarantor.

An extremely difficult demand becomes manageable once the business and personal records are organized. In most of the cases we have seen, though the sample is not scientific, the quaint belief that closure ends the obligation is the first thing the file corrects. Whether this correction arrives before or after referral is a question I cannot answer from this desk.

The 15 business day hearing window is an extremely short period in which to assemble records, so review and analyze the demand before deciding how to answer. The objective is an account of what each person undertook, with the response grounded in the document that binds that person.