The Pandemic Ended, Small Business Debt Didn’t
Six years after COVID, America’s emergency loans are still weighing on small businesses. Congress needs to finish what it started.
By Mitch Goldstone | Small Business Advocate
In 2020, Washington moved quickly to keep America’s small businesses alive. Six years later, some of those same businesses are still trying to recover from the cost of that rescue. The COVID Economic Injury Disaster Loan program provided roughly $385 billion to help businesses survive an extraordinary shutdown. Owners used the money to cover payroll, rent, utilities, insurance, and other expenses while customers were gone. The loans carried interest. Repayment could last 30 years.
I believe Congress needs to create a comprehensive COVID EIDL debt relief program. It should cancel accrued and future interest, return eligible interest already paid, offer affordable settlements, and consider principal forgiveness. Owners who are repaying their loans deserve fair treatment too.
The original purpose was to keep businesses open. Congress should find out whether the debt is now contributing to the very failures it was meant to prevent.
No Customers. Bills Still Due.
Think about a restaurant in April 2020. The dining room is closed. Employees need paychecks. The landlord expects rent. The insurance company still wants its premium. Nobody knows when customers will return. The same thing happened to dry cleaners, retailers, hair salons, and countless other neighborhood businesses. Many had operated successfully for years. Then the pandemic interrupted commerce almost overnight.
Without emergency help, more would have closed permanently. Workers would have lost jobs. Suppliers would have lost customers. Landlords would have lost tenants. Cities would have lost tax revenue. When a family business closes, its customers don’t always find a replacement. The empty storefront may remain empty. The employees move on. Years of work can disappear in weeks.
That was why the government intervened. Preventing widespread business failures served the entire country.
The Loans Banks Couldn’t Make
Imagine asking a bank for money when your business has almost no revenue. You cannot predict when customers will return. You have expenses to pay, but no reliable forecast of future sales. A commercial lender would have serious concerns. Banks examine cash flow, collateral, credit history, and the borrower’s ability to repay. During the shutdown, entire industries faced the same uncertainty.
Banks participated in the separate Paycheck Protection Program because the federal government provided guarantees. Ordinary commercial lending, however, couldn’t reasonably be expected to absorb the full risk of a national economic emergency. The SBA offered a streamlined online application because businesses needed help quickly. Processing times varied, but the need for emergency liquidity was immediate.
For many owners, borrowing wasn’t about expansion. It was about surviving long enough to reopen. That distinction should matter when Congress considers how these loans ought to be repaid.
The Interest Clock Never Stopped
COVID EIDL loans for businesses generally carried a fixed 3.75% interest rate. Borrowers eventually received a 30-month payment deferment, but interest continued accumulating throughout that period. On a $100,000 loan, approximately $9,375 in simple interest could accumulate over 30 months while the full principal remained outstanding. The business didn’t receive another $9,375. It simply accumulated that much interest before regular payments began.
Then came the hardship arrangements. Earlier versions allowed qualifying borrowers to make payments as low as 10% of the normal monthly amount. Later stages could require 50% or 75%, depending on eligibility and program rules. The reduced payments provided temporary breathing room. But interest kept running. When a payment was smaller than the interest accruing, unpaid interest could build up. Depending on the loan’s history, the total amount owed could exceed the original principal.
The SBA’s prior payment assistance program offers eligible borrowers a 50% reduction for six months. Interest continues. The business must also be open and operating. That helped someone facing a short-term cash shortage. It didn’t solve every long-term problem. An owner whose business has closed may not qualify at all.
Congress needs to examine the debt itself rather than repeatedly postpone full payments.
Thirty Years. Nothing to Own.
Here’s the comparison that stays with me. Take out a 30-year mortgage to buy a house. You make payments for decades. Eventually, you own the property. It may have increased in value. Now consider a business owner who borrowed through EIDL to pay rent, payroll, insurance, and utilities during the shutdown. Those expenses were necessary. They helped preserve the business. But the loan itself didn’t purchase an appreciating asset.
If the business survives, keeping it alive has real value. If it closes, the owner may still owe money for expenses paid years earlier. Few companies last five years, much less thirty.  A homeowner can finish paying a mortgage with a deed. An EIDL borrower can finish paying for a business that no longer exists. That is why emergency survival debt deserves a different discussion from ordinary borrowing used to purchase long-term assets.
The Defaults Are a Warning
An August 2025 SBA inspector general audit examined 369,588 delinquent COVID EIDL loans charged off as of December 18, 2024. Those loans represented approximately $47.2 billion. The audit reported roughly $35 million in recoveries during the early liquidation period it examined. That wasn’t a final recovery rate for the entire program. It did, however, raise questions about the effectiveness of federal collection efforts. A charge-off doesn’t automatically forgive the debt. Treasury confirms that delinquent COVID EIDL loans began entering its Cross-Servicing program in September 2025. Additional collection costs may apply.
Small-business bankruptcies are rising too. Epiq AACER reported a 46% increase in Subchapter V bankruptcy elections during the first nine months of 2026 compared with the same period in 2025. Those figures don’t prove EIDL caused the bankruptcies. Congress should obtain the records needed to determine how much pandemic debt is contributing to financial distress. How many borrowers have closed their businesses? How much interest remains unpaid? What percentage of loans are delinquent? How much has Treasury recovered after collection costs? We should know the answers by now.
Other Countries Wrote Different Rules
I previously examined how other nations supported small businesses during COVID. Their programs offer useful comparisons. Canada provided interest-free emergency business loans with conditional partial forgiveness. Britain offered low-interest Bounce Back Loans with flexible repayment options. Germany provided emergency grants. Australia subsidized wages through its JobKeeper program. America also offered forgivable PPP loans, EIDL advances, and other assistance. No country had a perfect response. Some governments still face unpaid loans, fraud, and substantial public costs.
But those examples show that governments had choices. They could combine loans with grants, wage support, conditional forgiveness, and repayment flexibility. Six years later, Congress should study which approaches helped businesses recover without leaving unnecessary long-term debt.
Washington Has Found the Money Before
The federal government has made major financial commitments when leaders believed the national interest justified them. American farmers received billions in direct assistance during trade disruptions. The USDA’s 2019 Market Facilitation Program distributed approximately $14.4 billion. Those were payments, not 30-year loans. In October 2025, Treasury announced a $20 billion currency swap arrangement supporting Argentina. That wasn’t a grant, but it demonstrated the scale of financial support Washington was prepared to arrange.
During the financial crisis, Treasury invested approximately $80 billion to support the American auto industry. Much was recovered, although taxpayers ultimately incurred a net cost. President Trump has also proposed a $5,000 payment to American adults, conditional on Republicans retaining control of Congress. Published estimates suggest a potential cost of approximately $1.3 trillion. That proposal hasn’t been enacted or funded.
Harvard Kennedy School economist Linda Bilmes estimates that the Iran war could eventually cost American taxpayers at least $1 trillion. That is a projection, not the amount spent so far. It includes military operations, replacing weapons, veterans’ medical care, disability benefits, and interest on borrowed money. Some costs could continue for decades. If Washington faces a potential trillion-dollar war bill, why can’t Congress seriously examine relief for small businesses still struggling with COVID EIDL debt?
These programs aren’t financially identical. Grants, investments, currency swaps, military spending, and proposed payments have different costs. But they show the scale of commitments Washington has considered when leaders believed the stakes justified them. The new Congress should calculate the cost of comprehensive EIDL relief with the same seriousness.
What Real Relief Would Mean
Congress must pass bipartisan COVID EIDL relief legislation. Cancel all unpaid interest, stop future charges, and refund interest already collected. Offer affordable settlements and principal forgiveness for businesses facing financial hardship. Small businesses borrowed to survive government-mandated shutdowns during a national emergency. Many are now trapped in decades of debt. Washington has spent billions rescuing major industries. Small businesses deserve relief, too. Every dollar spent on pandemic debt is money unavailable for hiring, growth, and keeping businesses open. Congress helped create this debt burden. Now it must help resolve it before more small businesses close.
Interest relief alone is insufficient; borrowers need affordable settlement options. Many should qualify for principal forgiveness because their businesses have permanently closed or they have experienced lasting financial hardship. The government should also review Treasury collection charges, correct inaccurate loan records, and establish a practical process for borrowers to resolve disputes. Referring defaults to a collection agency and imposing an additional 30% fee on companies with no money is impractical. Fraud should remain a separate issue. Legitimate borrowers who could not recover from the shutdown should not automatically be treated as though they obtained loans dishonestly.
Congress needs to publish current figures on outstanding principal, accrued interest, interest already collected, defaults, charge-offs, recoveries, collection expenses, and bankruptcies involving EIDL borrowers. Only then can lawmakers make an informed decision about the cost of reform.
January 2027 Could Open the Door
The November 3 midterm elections could change which party controls Congress. If Democrats win majorities in the House and Senate, new committee leadership could begin hearings in January 2027, request detailed SBA and Treasury records, and consider legislation addressing the remaining EIDL debt. That wouldn’t guarantee relief. Any law would still need sufficient votes and presidential approval. Republicans should participate in the review because this problem affects businesses across the country.
I want candidates from both parties to explain what they would support. Should interest accumulated during the original deferment be canceled? Should borrowers receive credits for interest already paid? How should permanently closed businesses be treated? What settlement options could improve recoveries for taxpayers? Those are practical questions. They deserve specific answers.
Congress Still Has a Job to Finish
I raised concerns about the long-term EIDL problem in The Hill‘s Op-Ed in January 2026. The Business Journal has also examined the growing federal collection problem, which includes my in-depth interview.
Since 2005, I’ve served as lead plaintiff in a merchant payment card class action lawsuit that resulted in a $5.54 billion settlement benefiting millions of American merchants. That experience taught me how important documented evidence becomes when challenging a financial system that affects businesses nationwide. I want to hear from EIDL borrowers who are still paying, those who defaulted, those whose businesses closed, and those who repaid everything. Their experiences can help journalists and lawmakers understand what happened after the emergency loans arrived.
Did the hardship arrangements help? Has the balance declined? How much interest has accumulated? What happened when the debt reached the Treasury? Did the business survive?
Those answers matter because the original rescue was never supposed to become a permanent obstacle to recovery. America acted during COVID because it understood the danger of losing thousands of small businesses. That decision helped protect jobs, neighborhoods, and local economies. Now Congress needs to examine what happened to the businesses that accepted the government’s help.
Millions of mom-and-pop small businesses borrowed to survive the shutdown. Six years later, Washington needs to finish the rescue.
About the Author
Mitch Goldstone is CEO of ScanMyPhotos.com, a California-based small business founded in 1990. Since 2005, he has served as lead plaintiff in a 20-year merchant interchange payment card class action lawsuit, which resulted in a $5.54 billion settlement benefiting millions of U.S. merchants.
Revised on October 12, 2026.
