Navigating SBA Loan Programs
Are you interested in learning more about the various types of SBA Loan Programs? Protect Law Group is here to keep you informed. Learn more today!
We Provide Nationwide Representation of Small Business Owners, Personal Guarantors, and Federal Debtors with More Than $30,000 in Debt before the SBA and Treasury Department's Bureau of Fiscal Service
No Affiliation or Endorsement by any Federal Agency
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Clients borrowed and personally guaranteed an SBA 7(a) loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
Client’s small business obtained an SBA 7(a) loan for $150,000. He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made. The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.
Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency. After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.
To determine if an SBA OIC is possible the following information must be provided;• A completed and signed SBA Form 1150 Offer in Compromise which outlines the terms of the offer and why the offer is being made. Be sure to address all the items on the forms “Instructions for Presenting the Offer” and “Elements of a Workable Compromise Offer.” You should also discuss the settlement arrangements that are being made with other creditors.• All offeror(s) must complete and sign an SBA Form 770 Financial Statement of Debtor and provide copies of the most recent two years of personal IRS Tax returns (or a copy of the Extension if not filed). The SBA Form 770 will be reviewed and compared with the original SBA Form 413 “Personal Financial Statement” completed at the time of loan approval. Valuations of property subject to judgment must be supported.• Copy of a current paystub if you are employed.• Additional information may be necessary depending on the individual circumstances of the transaction.
If your SBA loan is in default and you are working with your lender to wind down the business and settle the deficiency with an offer in compromise, time is of the essence. Banks generally do not wait much longer than 60-90 days after the defaulted borrower (business) has been liquidated or shut down to tender an OIC to the SBA for consideration which, if accepted, could potentially release the guarantors from the deficiency for a lesser amount. Generally speaking, the bank or CDC will send you what is commonly known as a Notice of Default, Acceleration and Demand for Payment for the entire loan balance due. If litigation is not a fiscally viable option and after certain collateral liquidation, you may be offered the chance to submit an SBA OIC with the bank or CDC for SBA consideration. If your case is ultimately transferred to the SBA, you should receive a 60-day Official Notice and demand for payment. If you fail to timely submit an SBA OIC within the administrative time frame as noted in this letter, the SBA will then refer your debt to the U.S. Department of Treasury for enforced collection, and thus, you will probably lose your one (1) time shot to settle for less than what is purportedly owed on the SBA debt through the SBA Offer in Compromise process..It should be noted that Treasury rarely collects on these bad loans directly – rather they hire private collection agencies (PCAs) to handle this. These PCAs don’t know anything about the history behind the loan – their job is to be ruthless in their collection endeavors as they generally receive a generous percent of the collected amount or actually bought the so-called junk federal debt for pennies on the dollar. Several of these federally approved private collection agencies or junk debt buyers are particularly nasty, and rarely settle for less than 50% of the outstanding amount as the incentives for collection, litigation and judgment pursuit are very high. Contrast that with the results that we have reviewed and settled and it’s easy to see the importance of addressing your outstanding SBA debt sooner rather than later, whether you’re working with a non-attorney consultant, an SBA Attorney or Federal Agency Practitioner, or attempting to do it yourself. If you think your banker is nasty or difficult to work with, you don’t want to experience the tactics of these collection agencies or junk debt buyers.
Subchapter V debtors must file their reorganization plan within 90 days of entering bankruptcy.
If the debtor cannot commit to a reorganization plan within 90 days, the debtor may file an extension plea. The bankruptcy court decides on whether to approve or deny the extension plea.
Approval of the plan will depend on whether any creditors object and the court's own calendar.
The adequacy of an SBA OIC must begin with an evaluation of the assets of the obligor(s). The starting point is ordinarily the net present value of the forced sale value of such assets (not the loan balance). This value combined with the prognosis of the obligors’ earning power form the basis for determining the adequacy of the offer. The review must balance the right of the Government to collect the amount owed and the obligation to treat all obligors with dignity and fairness.
Even if your business incorporated (i.e. corporation, Limited Liability Company), almost all lenders and the SBA required that you sign personal guarantees as part of the initial loan funding process. Therefore, despite the fact that your business entity signed on the Loan Agreement with the bank or CDC, you would still be liable as a result of the personal guaranty that you or any other individuals signed. The personal guaranty, upon default on the loan, gives the bank or CDC and the SBA direct access to your personal assets such as your home, personal bank accounts, investments, real estate, etc.
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