13 Sep 23

Can SBA seize bank accounts?

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Last Updated on: 14th September 2023, 12:11 am

Can the SBA Take My Bank Accounts if I Default on a Loan?

Getting financing from the Small Business Administration (SBA) can be real helpful for starting or growing a small business. But what if you can’t pay back the money? Can the SBA swoop in and take cash from your bank accounts? This is an important question if you ever find yourself struggling to make loan payments.

The Short Answer

Yes, the SBA can seize money from your bank accounts if you default on a loan. They can’t just take money for no reason though. There’s a process they gotta go through first. But at the end of the day, your bank accounts aren’t totally safe if you owe the SBA money.

How the SBA Collects on Defaulted Loans

Let’s break it down step-by-step so you really understand how the SBA gets their cash back when you default:

  1. You miss payments on your SBA loan. After being late a few months, you default.
  2. The SBA demands full repayment of the loan balance.
  3. You still don’t pay, so the SBA sues you to get a court judgment.
  4. The court judgment allows the SBA to seize your assets, including bank accounts.
  5. The SBA serves your bank with a writ of garnishment or levy.
  6. Your bank freezes then hands over the money to the SBA.

So in short, the SBA can’t just raid your bank accounts whenever they feel like it. They need to follow a legal process and get court approval first. But that whole process can happen pretty fast if you ignore the problem.

What Types of Assets Can the SBA Seize?

Bank accounts aren’t the only things the SBA can take if you default. They can also seize:

  • The collateral you used to secure the loan, like equipment or real estate
  • Your tax refunds
  • Accounts receivable owed to your business
  • Investment accounts and retirement accounts
  • Your personal assets if you guaranteed the loan yourself

So almost any assets tied to you or your business could be fair game. Your personal bank accounts aren’t 100% protected.

Are Any Assets Off Limits to the SBA?

There are a few assets the SBA can’t take without special court approval:

  • Social Security benefits
  • Veterans benefits
  • Child support and alimony
  • Unemployment compensation
  • Workers compensation
  • Certain retirement accounts like 401(k)s

But most of your property and bank balances can be seized once they get that court judgment against you.

How Much Cash Can the SBA Take from My Accounts?

The SBA can garnish your bank accounts up to the full amount you owe on the loan, plus fees and interest. If you owe $75,000 and have $10,000 in the bank, they can take the full $10,000.

Federal law does limit garnishment to 25% of your disposable earnings, which is your take-home pay. But for bank account balances, the SBA can generally take it all.

How to Prevent the SBA from Seizing Your Money

To keep the SBA away from your bank accounts, you gotta avoid defaulting in the first place. But if it’s too late for that, some tips include:

  • Work out alternative payment plans with the SBA.
  • Consolidate or refinance the loan to lower payments.
  • Make partial payments to show good faith.
  • Get experienced legal help to respond to any lawsuits.
  • File bankruptcy to pause collections, if that’s an option.
  • Shift money to protected accounts like retirement plans.

The bottom line is you don’t want the SBA raiding your bank accounts to get their money back. Defaulting on one of their loans can lead to getting your accounts frozen and seized. So tread carefully when borrowing from them and act fast if you do default.


U.S. Small Business Administration, “What happens if I default on an SBA loan?”
U.S. Small Business Administration, “Borrowers: Garnishment and Other Collection Actions”