AmiSight 8/20: The SBA’s Growing Credit Problem

One of the most overlooked stories in small business finance is the SBA’s handling (or lack thereof) of the mountain of Covid-era EIDL loans gone bad—a situation BizJournals recently examined in depth.

According to the Inspector General, nearly $62 billion in personally guaranteed loans are either delinquent or already charged off, yet the SBA has recovered less than 1% of it. The watchdog says the agency hasn’t used many of the tools at its disposal — like site visits or Department of Justice referrals — and is instead leaning on automated letters, phone calls, and emails.

The SBA’s main new initiative? They’re adding functionality to their systems so they can report more delinquent borrowers to the credit bureaus — with a target completion date of mid-2026. Beyond that, the agency argues it’s simply not cost effective to chase most of this debt.

Meanwhile, business owners are stuck in the middle. Many are caught in a cycle of debt and declining performance, with the SBA increasingly showing up as a top creditor in bankruptcy filings. And while some had hoped for forgiveness, no administration has moved in that direction.

For entrepreneurs, the lesson is clear: government relief can be a lifeline in a crisis, but it can also create long shadows. If you took on debt, you still have to plan for repayment — because whether through Treasury, DOJ, or a credit bureau, the bill eventually comes due.

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