SBA and EIDL Loans Referred to Treasury

Why the Letter Is Coming From Treasury and Not the SBA

Federal law requires an agency to refer a debt that is more than 180 days delinquent to Treasury's Bureau of the Fiscal Service for cross-servicing. Once that happens, the SBA stops servicing the loan and, in practice, stops taking it back. Treasury assigns the account to one of its contracted private collection agencies. Coast Professional, Inc. is one of them, and Miami business owners frequently hear from it first.

Two things change at that moment. First, a collection fee is added. Treasury's cross-servicing fee can approach 30 percent of the balance, which is why a $300,000 loan is suddenly described as a $390,000 debt. Second, the SBA's own relief programs are gone. The Hardship Accommodation Plan that let borrowers pay a fraction of their payment for six months ended in March 2025, and the SBA's offer in compromise program was never available to an operating business in any event. Anyone who tells you to "call the SBA and ask for a modification" is describing a door that has closed.

What Treasury Can Do to a Florida Business and Its Owners

Treasury does not need to sue you first. Under the Debt Collection Improvement Act it can:

• Offset federal tax refunds, federal contractor payments, and a portion of Social Security benefits through the Treasury Offset Program.
• Order an employer to withhold up to 15 percent of a guarantor's disposable pay through administrative wage garnishment, with 30 days' notice and a short window to request a hearing.
• Report the debt to the credit bureaus and flag the business and its owners as ineligible for future federal loans.

For larger balances, Treasury refers the file to the Department of Justice for a civil action. A judgment in favor of the United States becomes a lien on real property and lasts twenty years, renewable. Florida's homestead exemption protects your primary residence from that lien, but it does not protect a rental condo, an investment property, a commercial unit, or a second home. Miami owners who hold property that is not their homestead are more exposed than they think.

The Personal Guarantee

Every COVID EIDL over $200,000 required a personal guarantee from each owner of 20 percent or more of the business. If you signed one, the debt is yours as well as the company's, and everything above applies to you personally. Loans over $500,000 also called for real estate collateral where the borrower or a guarantor had any. Some of those mortgages were recorded in the Miami-Dade or Broward official records and some were signed but never recorded. Part of our first review on every file is finding out which applies to you, because a secured loan and an unsecured loan lead to different strategies.

What Can Still Be Done After Referral

Treasury and its collection agencies enter repayment agreements every day. The starting position is three years, because federal collection standards direct that installment agreements should liquidate a debt within three years, and three years is what a collection agency can approve on its own. Longer terms exist. They require a financial statement that documents why the business cannot pay within three years, and they require approval above the collection agency level. The negotiation is about term length and monthly amount, and it is won or lost on the quality of the financial package.

A compromise for less than the full balance is possible but is a different kind of negotiation. Treasury has compromise authority, a debt of any size above $100,000 needs Department of Justice concurrence, and the government evaluates the guarantor's personal assets and income, not just the business. Compromises are most realistic when there is a lump sum available now, for example from refinancing a property, and the government would otherwise face years of litigation and garnishment to collect the same money.

Where the business cannot carry any payment Treasury will accept, a Subchapter V Chapter 11 for the company can cap what the business pays at its projected disposable income over three to five years. That is a workable tool for a Miami contractor, restaurant, or service business with steady revenue and thin margins. It has costs, the trustee will scrutinize owner compensation, and it does not release the guarantors on its own, so it has to be planned together with the personal side.

What Not to Do

• Do not transfer property to a spouse, parent, or child while a federal debt is in collection. The transfer will be unwound as fraudulent and it hands the government a fraud narrative on top of the debt.
• Do not sign a three-year agreement you cannot keep just to make the calls stop. A second default with the fee attached is worse than the first.
• Do not submit a financial statement to Treasury without reviewing the original loan application first. Those statements are signed under penalty of perjury, and if the Department of Justice ever looks at the file, it will read the application next to them.

How We Handle These Matters

1. 1

   The Documents

   We start with the note, the loan authorization, the guarantees, any recorded mortgage or UCC filing, the application, and an itemized statement from Treasury showing exactly what is being claimed and what fee has been added.

2. 2

   The Exposure Review

   We advise the business and each guarantor on their actual exposure under Florida and federal law, including what a judgment could reach and what the homestead and other exemptions protect.

3. 3

   The Financial Package

   We prepare the financial statements for the business and each guarantor, checked against the original application, because the term Treasury will approve depends on that package.

4. 4

   The Negotiation

   We negotiate with the collection agency and, where necessary, directly with the Bureau of the Fiscal Service.

We bill hourly against a deposit held in our trust account, and we do not promise a term, a payment, or a discount. We can tell you, after the review, what is realistic for your business, and that is usually more than the last person told you.

What to Bring to the Consultation

You do not need all of this to call us. It is what we will eventually need to give you a specific answer instead of a general one.

• The most recent letter from Treasury or the collection agency, with the itemized balance
• The note, loan authorization, and any personal guarantees
• The original EIDL application and any increase or reconsideration requests
• Any mortgage or UCC filing the SBA recorded in Miami-Dade, Broward, or Palm Beach
• Recent business financials and tax returns
• A list of real property each guarantor owns, and which one is the homestead

Frequently Asked Questions

• My EIDL was sent to Treasury. Can I get it back to the SBA?

  Not for a routine modification. The SBA's position is that COVID EIDL and PPP debts are not returned after referral. The narrow exception is a successful dispute of the underlying debt.

• Coast Professional says I have to pay in three years. Is that the law?

  Three years is the default under federal collection standards, not a legal maximum. Longer terms are available with documented financial hardship and require approval above the collection agency.

• Can Treasury take my house in Miami?

  Not your homestead, through a judgment lien. Any other real property you own in Florida is reachable once the United States obtains a judgment.

• Is an EIDL loan dischargeable in bankruptcy?

  Yes, for both the business and the guarantors, unless the government proves the loan was obtained by fraud. That is one reason the accuracy of the original application matters. Our business bankruptcy page covers the options for the company itself.

• Does making one payment help?

  A payment does not restore the loan to the SBA and does not stop the fee. Payments also restart the government's time to sue. Talk to counsel before paying anything.