FEATURED IN FORBES · DAILY COVER
They Took Small Business Loans During COVID. Now The Government Is Coming To Collect
By John Schroyer, Staff Writer · November 1, 2026
Forbes has put the federal crackdown on unpaid COVID-era EIDL loans on its November 1, 2026 Daily Cover. The story follows small business owners across the country who now face Treasury collection, withheld tax refunds and wage garnishment over disaster loans they took to keep their doors open during the pandemic.
To explain what borrowers can actually do, Forbes turned to John S. Benson, senior partner and co-founder of Penglase & Benson in Doylestown, Pennsylvania. John has advised hundreds of EIDL borrowers this year, and the article highlights the results he has already achieved for clients who were sent to collection without proper warning.
What Forbes Reported
562,000+
pandemic-era loans the SBA referred to the Treasury for collection in April
30%
collection fee added to many balances once a loan reaches the Treasury
No time limit
on collecting federal debts through administrative offset
- Mass referrals to the Treasury. In April, the SBA transferred more than 562,000 delinquent pandemic loans, worth roughly $22 billion, to the U.S. Treasury for collection. Learn what a Treasury referral means for your business.
- Balances that jump overnight. Borrowers told Forbes their collection demands included back interest plus a 30% collection fee, turning a manageable monthly payment into a six- or seven-figure bill. Here is why the 30% Treasury fee is added.
- Collection without a lawsuit. The Treasury can withhold federal tax refunds, garnish wages and offset part of Social Security benefits through administrative action, with no court judgment required. See what to do after a wage garnishment notice.
- “Operation No Doze.” In September, the administration announced a joint enforcement effort by the Department of Justice and the Treasury, including 30-day demand letters for full repayment sent to flagged borrowers.
- Personal guarantees and fewer relief options. Owners holding 20% or more of a business that borrowed over $200,000 had to personally guarantee the loan, and the SBA’s Hardship Accommodation Plan is no longer available. Read what happens when an EIDL loan goes into default.
John Benson’s Perspective
Disputing Collection When the SBA Never Sent Notice
As Forbes reported, many of the borrowers John has advised this year say they heard nothing from the SBA for years before a Treasury letter or a private collection agency arrived. Dozens of them are now disputing Treasury collection on that basis, and John has already had several loans sent back to the SBA with the 30% penalty removed because the borrower never received the required prior communication.
That result matters. When a loan is recalled from the Treasury, the collection agency drops out of the picture, the penalty can come off the balance, and the conversation returns to where it belongs: between the borrower and the SBA.
Why Some Borrowers Need Two Bankruptcies
Forbes also asked John about owners who reorganize their business under Chapter 11 to keep it running. The catch is the personal guarantee: a business bankruptcy does not end the owner’s personal liability, so the government can keep collecting from the owner’s wages and assets.
“That would take it off the books entirely, but you’d need two bankruptcies to do it.”
JOHN S. BENSON, IN FORBES
For borrowers weighing that path, the details decide the outcome, from which chapter fits the business to how the guarantee is treated. Read more in EIDL Loan and Bankruptcy: How to Legally Eliminate Your SBA Debt.
Why the Notice Requirement Matters
Federal debt collection is not supposed to begin with a surprise. Before an agency collects a debt by administrative offset, 31 U.S.C. § 3716 requires it to give the debtor:
- written notice of the type and amount of the debt, the agency’s intent to collect by offset, and an explanation of the debtor’s rights;
- an opportunity to inspect and copy the agency’s records on the debt;
- an opportunity for review of the decision within the agency; and
- an opportunity to enter a written repayment agreement.
Wage garnishment carries its own protections under 31 U.S.C. § 3720D: written notice mailed to your last known address at least 30 days before proceedings begin, the right to a hearing on the debt, and a cap of 15% of disposable pay.
The SBA told Forbes that every borrower received notice by mail, email and the loan portal. Borrowers who never did may have grounds to challenge the referral, which is why the paper trail matters. Gather:
- the dates of any SBA letters or emails, and the address they were sent to;
- the messages and documents in your SBA loan portal, including when each one appeared;
- proof of the mailing address and email the SBA had on file; and
- the date your automatic payments stopped, and any explanation you were given.
What This Means for Pennsylvania Business Owners
Whether you run a shop in Bucks County or a company in Philadelphia, the same steps apply wherever your loan stands today:
- Do not ignore a 30-day demand letter. Borrowers who do not pay or respond within the deadline are being referred to the Treasury or the Department of Justice.
- Build your notice history now. Use the checklist above before you call the SBA or a collector.
- Confirm whether you signed a personal guarantee. It decides whether collectors can reach your wages, tax refunds and personal assets, and whether closing the business ends the debt.
- Compare your options early. Depending on where the loan stands, that may mean disputing the referral, a repayment agreement, an EIDL offer in compromise, or bankruptcy.
- Move before garnishment starts. If you request a hearing within 15 days of a garnishment notice, federal law requires that hearing to take place before the garnishment order is issued.
Frequently Asked Questions
| Question | Answer |
|---|---|
| Can the Treasury take my tax refund without a court order? | Yes. Through the Treasury Offset Program, federal tax refunds and part of certain federal benefits can be offset administratively. Federal law sets no time limit on starting an administrative offset. |
| Is a charged-off EIDL loan the same as a forgiven loan? | No. A charge-off is an accounting entry by the SBA. The business, and any owner who signed a personal guarantee, still owes the debt. |
| Can I dispute a Treasury referral if the SBA never contacted me? | Potentially. Federal law requires notice and an opportunity for review before offset. If proper notice was not given, the referral may be challenged and the loan returned to the SBA. |
| Can the 30% collection fee be removed? | In some cases. When a loan is recalled from the Treasury to the SBA, as in the cases John described to Forbes, the collection fee can come off the balance. |
| Will bankruptcy eliminate my personal guarantee? | A business bankruptcy alone usually will not. Removing the guarantee generally requires a personal bankruptcy as well, and debts tied to fraud may not be dischargeable. |
Received a Treasury or Collection Notice on Your EIDL Loan?
Talk to John Benson and the team at Penglase & Benson. We will review your loan history, check whether the required notices were sent, and explain your options.
This page summarizes coverage published by Forbes on November 1, 2026. The quote attributed to John S. Benson is taken from the original article, which you can read in full on Forbes. This page provides general information and is not legal advice.
