The EIDL Reckoning: More Than a Million Pandemic Loans Have Been Charged Off

This is the third in a series by Jay Newman examining the long-term consequences of the COVID-19 EIDL program for America’s small businesses

In my first article about the COVID-19 Economic Injury Disaster Loan program, I wrote from personal experience. Our small business accepted an EIDL during one of the most uncertain economic periods of our lifetime. Like millions of other small-business owners, we were trying to survive a pandemic that none of us had anticipated and few of us were financially prepared to withstand.

In the second article, I stepped back from our individual experience and looked at the size of the program itself.

The numbers were staggering. The Small Business Administration ultimately approved almost 4 million COVID-19 EIDL loans totaling nearly $378 billion.

Now there is another number that deserves our attention. According to the U.S. Government Accountability Office, as of June 2024, approximately 1.11 million COVID-19 EIDL loans were in charge-off status. Another approximately 277,000 loans were more than 30 days delinquent.

Think about that for a moment. More than one million pandemic-era small-business loans had already reached charge-off status, while hundreds of thousands more were behind on their payments. This is no longer simply a story about a government loan program. It is a story about what has happened to a substantial portion of America’s small-business community.

What Does “Charged Off” Really Mean? We need to be careful with terminology. A charged-off loan does not necessarily mean the business has closed, nor does it necessarily mean the government has permanently abandoned efforts to collect the debt. Charge-off is an accounting and servicing status applied to seriously delinquent debt. The SBA itself explains that some COVID EIDL borrowers with loans in charged-off or uncollectible status may still be able to bring their loans back into good standing under certain circumstances.

So it would be inaccurate simply to say that 1.11 million small businesses have failed. But it would be equally misguided to ignore what the number tells us. When more than a million loans from a program designed to rescue small businesses have reached charge-off status, something significant has happened.

And the problems have continued beyond the June 2024 snapshot. An August 2025 report from the SBA’s Office of Inspector General examined the agency’s collection efforts on delinquent COVID-19 EIDL loans. Among its findings, the Inspector General reported that, as of December 2024, SBA had not provided evidence that it had reported 832,930 delinquent COVID EIDL obligors to credit bureaus. The issue had become enormous not only for borrowers but also for the federal government charged with servicing and collecting these debts.

These Were Supposed to Help Businesses Survive!

That is what troubles me most. The COVID EIDL program was created during an extraordinary national emergency. Restaurants were closing. Retail stores lost customers. Offices shut down. Supply chains were disrupted. Employees were sent home. Small businesses watched revenues disappear virtually overnight. The federal government encouraged businesses to seek assistance.

And many of us did. These weren’t necessarily reckless business owners borrowing money to expand beyond their means. Many were business owners trying to keep employees working, pay rent, maintain inventory and simply stay alive long enough for the economy to reopen. For many businesses, the EIDL did exactly what it was intended to do. It provided desperately needed cash at exactly the right moment. But surviving the pandemic and surviving the loan have turned out to be two different things.

The Mathematics Can Be Brutal: This is where our own experience becomes relevant. Our business made its required payments faithfully. Yet because interest began accumulating while payments were deferred, we eventually discovered that years of payments had done remarkably little to reduce our principal. We increased our payments. And we still owe more than we originally borrowed.

That does not make us unique. It makes me wonder how many of those delinquent and charged-off borrowers experienced some version of the same problem. A small business can remain open and still struggle financially. It can employ people, serve customers, pay taxes and contribute to its community while carrying debt that becomes increasingly difficult to escape. Eventually, something has to give.

Nearly Four Million Loans and More Than One Million Charged Off: Put the two numbers beside one another. Nearly 4 million COVID EIDL loans were approved. By June 2024, approximately 1.11 million were in charge-off status. That means the number of charged-off loans alone was equivalent to roughly 28 percent of the number originally approved.

That comparison is not a formal default rate because loan populations and statuses change over time, and some borrowers may subsequently restore loans to good standing. But even with that important qualification, the magnitude should concern policymakers. If a private financial institution made millions of loans and later saw more than one-quarter as many loans reach charge-off status, we would probably be asking some serious questions. We should be asking them here as well.

What Happens Next? The federal government has a legitimate interest in collecting money that taxpayers loaned to businesses. Borrowers also signed legal agreements promising repayment. I don’t dispute either of those facts. But public policy should also recognize reality. What happens when aggressive collection of these loans causes otherwise viable small businesses to close? What happens to their employees? What happens to the taxes those businesses were paying? What happens to the communities they served? And how much of this money will the federal government realistically recover from businesses that simply do not have it?

Those aren’t arguments for automatically forgiving hundreds of billions of dollars. They are arguments for having a serious national conversation about what comes next. Perhaps that conversation should include restructuring certain loans, modifying interest provisions, extending repayment periods, creating more realistic hardship programs, or providing other options for businesses that can demonstrate both legitimate pandemic losses and good-faith repayment efforts.

There is an enormous difference between someone who fraudulently obtained government money and a legitimate small-business owner who borrowed during a national emergency, used the money to keep a business alive, and subsequently discovered that the debt had become extraordinarily difficult to repay. Our policies should recognize that difference.

The Rescue Shouldn’t Become the Disaster

The COVID EIDL program was born from good intentions. America faced an unprecedented crisis, and the federal government moved rapidly to keep millions of businesses alive. We should remember that. But good intentions do not guarantee good long-term outcomes. The numbers are now telling us something.

1.11 million loans in charge-off status.

Hundreds of thousands more delinquent.Behind those statistics are businesses. Behind the businesses are owners, employees and families. And behind many of those families is a story remarkably similar to ours: We borrowed because we were trying to survive.

Perhaps it is time for Congress and the SBA to look at the COVID EIDL program again; not as an emergency program from 2020, but as a long-term small-business debt problem in 2026. We saved millions of small businesses during the pandemic.

Now we should at least ask whether the very loans that helped save some of them are contributing to their struggles today. Because a rescue program should not ultimately become the thing that sinks the businesses it was created to save.