Selling a business. Buying out a partner. Refinancing equipment. For thousands of small businesses that took out a COVID-19 Economic Injury Disaster Loan (EIDL) between $25,000 and $200,000, any one of these ordinary moves may trigger a problem the owner didn't know was there.
For people in these scenarios, there could be—an active Small Business Administration lien on the business's assets that was never cleared or released before a deal closed.
That means a business owner who sells a piece of equipment, sells the business itself, or brings in new financing—without first getting SBA's written release, subordination, or approval—may be transferring something that still has a federal lien attached to it. That lien is on public record. The real risk isn't that the lien is hidden; it's that people see it and skip the step of getting it released or subordinated before closing.
If a lender is financing the purchase, a Uniform Commercial Code (UCC) search will typically catch this before closing. But in an all-cash deal, no lender means no built-in safety check. That means the buyer can end up owning an asset still subject to an SBA lien, with only a claim against the seller (often under a clear-title warranty) to fall back on.
The loan range of between $25,000 and $200,000 sits in a dangerous middle zone. It's large enough that the SBA placed a blanket lien on the business's assets perfected through a UCC filing. It's small enough that, in most cases, no owner personally guaranteed the debt. That combination creates a false sense of security.
It’s a real-world scenario. Frost Law has seen this situation lead to deals unravelling, sales getting reversed, and business owners finding out too late that a lien they thought was resolved was still very much attached to what they just sold.
A key question matters right now for these businesses: Did you get SBA's sign-off before you sold, transferred, or refinanced business assets tied to your EIDL loan?
Under SBA's own published loan terms, collateral was required for every COVID-19 EIDL loan over $25,000, while a personal guarantee was only required once a loan exceeded $200,000. This usually shows up in both the SBA authorization and the loan’s security agreement for EIDL loans. For loans in between these amounts, that meant a blanket lien on the business's assets, inventory, equipment, receivables, and more—with no personal guarantee attached.
Business owners often read that as good news: No guarantee means no personal exposure. But what frequently gets missed is that the lien itself doesn't disappear just because there's no guarantee behind it. It stays attached to the business's assets until the SBA formally releases it. And the SBA has made clear it does not simply let that happen.
Frost Law has identified a consistent pattern among EIDL borrowers in the $25,000–$200,000 range who ran into trouble:
SBA's own COVID EIDL Servicing Center has published specific document requirements depending on what a borrower is trying to do, and none of it happens automatically:
Every one of these servicing actions comes with the same warning directly from SBA: Prior approval is required, and there is no assurance that it will be granted. SBA can condition its approval on resolving any default, correcting collateral issues, or requiring a payment, even after a complete application is submitted.
A lien that isn't properly released or transferred doesn't just sit quietly in the background. It can:
If your business has an outstanding COVID-19 EIDL between $25,000 and $200,000 and you're planning to sell an asset, transfer ownership, refinance, or wind the business down, don't assume the lien is someone else's problem, or that it disappears with the sale. Frost Law can review your loan status, confirm what SBA's lien covers, and help you navigate the release, substitution, subordination, or assumption process before a deal is signed—not after.
Call (410) 497-5947 or schedule a consultation for help to find out where your EIDL loan and lien actually stand.
Selling a business. Buying out a partner. Refinancing equipment. For thousands of small businesses that took out a COVID-19 Economic Injury Disaster Loan (EIDL) between $25,000 and $200,000, any one of these ordinary moves may trigger a problem the owner didn't know was there.
For people in these scenarios, there could be—an active Small Business Administration lien on the business's assets that was never cleared or released before a deal closed.
That means a business owner who sells a piece of equipment, sells the business itself, or brings in new financing—without first getting SBA's written release, subordination, or approval—may be transferring something that still has a federal lien attached to it. That lien is on public record. The real risk isn't that the lien is hidden; it's that people see it and skip the step of getting it released or subordinated before closing.
If a lender is financing the purchase, a Uniform Commercial Code (UCC) search will typically catch this before closing. But in an all-cash deal, no lender means no built-in safety check. That means the buyer can end up owning an asset still subject to an SBA lien, with only a claim against the seller (often under a clear-title warranty) to fall back on.
The loan range of between $25,000 and $200,000 sits in a dangerous middle zone. It's large enough that the SBA placed a blanket lien on the business's assets perfected through a UCC filing. It's small enough that, in most cases, no owner personally guaranteed the debt. That combination creates a false sense of security.
It’s a real-world scenario. Frost Law has seen this situation lead to deals unravelling, sales getting reversed, and business owners finding out too late that a lien they thought was resolved was still very much attached to what they just sold.
A key question matters right now for these businesses: Did you get SBA's sign-off before you sold, transferred, or refinanced business assets tied to your EIDL loan?
Under SBA's own published loan terms, collateral was required for every COVID-19 EIDL loan over $25,000, while a personal guarantee was only required once a loan exceeded $200,000. This usually shows up in both the SBA authorization and the loan’s security agreement for EIDL loans. For loans in between these amounts, that meant a blanket lien on the business's assets, inventory, equipment, receivables, and more—with no personal guarantee attached.
Business owners often read that as good news: No guarantee means no personal exposure. But what frequently gets missed is that the lien itself doesn't disappear just because there's no guarantee behind it. It stays attached to the business's assets until the SBA formally releases it. And the SBA has made clear it does not simply let that happen.
Frost Law has identified a consistent pattern among EIDL borrowers in the $25,000–$200,000 range who ran into trouble:
SBA's own COVID EIDL Servicing Center has published specific document requirements depending on what a borrower is trying to do, and none of it happens automatically:
Every one of these servicing actions comes with the same warning directly from SBA: Prior approval is required, and there is no assurance that it will be granted. SBA can condition its approval on resolving any default, correcting collateral issues, or requiring a payment, even after a complete application is submitted.
A lien that isn't properly released or transferred doesn't just sit quietly in the background. It can:
If your business has an outstanding COVID-19 EIDL between $25,000 and $200,000 and you're planning to sell an asset, transfer ownership, refinance, or wind the business down, don't assume the lien is someone else's problem, or that it disappears with the sale. Frost Law can review your loan status, confirm what SBA's lien covers, and help you navigate the release, substitution, subordination, or assumption process before a deal is signed—not after.
Call (410) 497-5947 or schedule a consultation for help to find out where your EIDL loan and lien actually stand.
