A Bridge Priced for a Recovery
The loan was designed as a bridge across a pandemic, and for a large share of American restaurants it has become the thing they cannot climb out from under. In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act and set in motion one of the largest small-business credit programmes the federal government has ever run. The instrument was the economic injury disaster loan — EIDL in the paperwork and in every conversation since — administered by the Small Business Administration. Its terms were built for a shock assumed to be temporary: interest rates far below anything a bank would offer a restaurant with an empty dining room, repayment stretched across decades, and a deferment period during which no instalment fell due. According to the Small Business Administration, individual applicants could borrow up to $2m. According to the Small Business Administration, since that March, 3.9 million Covid-related EIDLs have been issued, totalling $378.4bn. [2] The eligibility test was hardship caused by the pandemic, and few sectors could document hardship more thoroughly than food service. A restaurant that lost its dining room lost most of its revenue in a week.
A deferment postpones a payment; it does not forgive it. A 30-year term shrinks the monthly instalment; it does not shrink the original amount borrowed. As of June 2026, according to the Small Business Administration, $75.2bn of EIDL money had been charged off. A charge-off is an accounting admission rather than an amnesty: the lender concludes the money will not come back, books the loss, and leaves the obligation attached to whoever signed for it. The write-off cleans the government’s books. It does nothing for the borrower’s.
The aggregate hides a sector. Erika Polmar, executive director of the Independent Restaurant Coalition, a non-profit advocacy group for independent bars and restaurants in the US, frames the pandemic as an extinction event — “Covid was an extinction event for tens of thousands of restaurants.” Her sharper point concerns what the survivors did with the years that followed. Operators who did not receive restaurant revitalization fund grants had to service small-business loans or EIDLs out of whatever revenue they could find.
Repayment capacity depends on revenue, revenue depends on customers, and customers returned on a schedule no lender controlled. The paperwork answers the question in a single clause: what happens when the signature on the loan is worth more than the business standing behind it?
The Signature and the House
Above $200,000, an EIDL stopped being a loan to a business and became a loan to a person. Borrowers whose EIDLs totalled more than that figure were required to personally guarantee the debt. A personal guarantee is a promise that the owner’s own assets stand behind the company’s obligation, and it outlives the company. If the restaurant closes and the loan defaults, the Small Business Administration is not confined to the equipment, the lease or the goodwill. It can pursue the individual who signed.
Default then follows a script. When borrowers exceed 120 days past due, the loans are transferred to the US Treasury for collection, which adds fees and penalties that typically amount to about 30% of the principal. Where the loan is personally guaranteed, the IRS can garnish wages, tax refunds or a percentage of social security benefits — reaching the income before the borrower does. [2].
Randy Barnette, founder of the Virginia-based Ornery Beer Company, borrowed $500,000 in February 2021. Before the pandemic he had been searching for a second location for his restaurant and bar, which serves Ornery brand beers, and the EIDL looked like a way both to steady the existing business and to fund the expansion. The guarantee did not deter him, because nothing else on offer came close. What he remembers is the speed. An email from the agency arrived on a Monday, and a couple of signatures on DocuSign later the money was there: “It was so easy, I was afraid I was falling for a scam.”
The expansion did not go to plan. Several costly real estate deals fell through; a second restaurant eventually opened and is still trading, but declining sales forced him to shrink the production brewery and shut the original restaurant. With compounded interest, penalties and fees, the bill rose from $530,000 to more than $750,000. [2]. He is 56 and lives in Virginia, where bankruptcy law offers thin protection to homeowners: the state’s homestead exemption shields only $25,000 of home equity per individual, and a chapter 7 filing may discharge the EIDL while leaving the government free to place a lien on personal property. His own inventory of what is at stake is short. “My home that I’ve lived in for 20 years is the only thing I have of value. I don’t have any life savings. I don’t have retirement funds. I’ve dumped everything into this business to make it keep working through the years. If I lose my house, I’ll just be living in a trailer park until I die.” [2]
The Monthly Bill Nobody Budgeted For
Jai
Mazumdar has run Spice N Curry, a cafe and grocery in a modest strip mall near Florida International University in Miami, for almost 20 years. He took $370,000 in early 2021 on a 30-year term at 3.75% with a 30-month deferment, then added $87,000 the following year as losses mounted — a combined $457,000, well above the threshold at which a personal guarantee was required. The money is gone. Some went into refurbishing the space and installing new refrigeration and freezer units to expand the retail inventory; the rest covered operating expenses. He reopened the cafe in 2022, watched sales fall, and closed the dining room permanently after a year and a half. The business has lost money every year since the pandemic, and he has stayed current anyway. The two figures he sets side by side are these: “My monthly EIDL payment is $1,900, and my home mortgage is $1,600.” [2] To cover the gap he rented out a room in his own house. “I’ve been working seven days a week, 12 hours a day for the last three years. It’s become a completely hand-to-mouth existence.” Dan Jacobs, chef and co-owner of DanDan and EsterEv in Milwaukee, took his loan in 2021 and pays close to $5,000 a month to service it. Rolled out across a year, that is a salary: “For what we’re paying per month, if you break it out over a year, it’s the cost of a high-level manager in our company.” The payment cuts his profit margin by a third, and the revenue it is measured against is contracting — business is down close to 15% on last year. His diagnosis is not complicated: “And there’s no real reason for it, except the fact that the economy is trash.” Relief existed, briefly, and then stopped. For Barnette that expiry was the end of payment altogether: “Once the hardship program ended, we stopped making payments altogether. Because we can’t. We’ve been struggling.” John Benson, a small business attorney in Doylestown, Pennsylvania, reports a significant uptick in inquiries from restaurants trying to manage EIDL debt, and his firm has had success working with the Treasury to reinstate loans that entered collection or to settle clients’ debts for lesser amounts. He understands why his clients signed: “When you’re drowning in the ocean and that lifeboat comes by, you don’t count to see if it has enough oars, you just hop in.” He also rejects the suggestion that they were reckless, noting that no owner could have priced in inflation at this level, tariffs arriving mid-plan or immigration reshaping the labour force.
In September 2026 the Small Business Administration’s inspector general launched Operation No Doze, aimed at prosecuting fraud in Covid-era EIDL and paycheck protection programme lending. The government’s attention is fixed on the borrowers who took money they were never entitled to, while the far larger group who took money they cannot repay meets the Treasury’s collection machinery instead. [2]. Barnette is waiting for the other kind of intervention. “Frankly, I’m just kicking the can down the road, trying to improve the health of the business, until Congress changes things.” He adds that the industry is holding its breath for the midterms, hoping a change in the political climate produces something for borrowers. Until then the arithmetic runs on in a Miami strip mall, where the dining room stays dark, the grocery counter stays open, and each month a payment of $1,900 still leaves the account on time.
Sources
Mentioned organisations (context, not sources)
- Congress — Organisation (homepage)
- Small Business Administration — Organisation (homepage)
- Ornery Beer Company — Organisation (homepage)
- DocuSign — Organisation (homepage)
- Florida International University — Organisation (homepage)
- DanDan — Organisation (homepage)
- EsterEv — Organisation (homepage)
- Treasury — Organisation (homepage)