Credit Crunch For Small Businesses
We provide people who are facing an SBA loan default with solutions. We analyze SBA loan problems and provide solutions such as an SBA offer in compromise.
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
Book a Consultation Call
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.
Client personally guaranteed SBA 7(a) loan for $150,000. COVID-19 caused the business to fail, and the loan went into default with a balance of $133,000. Client initially hired a non-attorney consultant to negotiate an OIC. The SBA summarily rejected the ineligible OIC and the debt was referred to Treasury’sBureau of Fiscal Service for enforced collection in the debt amount of $195,000. We were hired to intervene and initiated discovery for SBA and Fiscal Service records. We were able to recall the case from Fiscal Service back to the SBA. We then negotiated a structured workout with favorable terms that saves the client approximately $198,000 over the agreed-upon workout term by waiving contractual and statutory administrative fees, collection costs, penalties, and interest.
Clients personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
The clients are personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
Filing fees with the court may vary but as of the time of this writing the filing fees are $1,738.
Attorneys' fees will vary on the complexity of your case but will be in the $15,000 to $25,000 range in most cases.
Under a regular Chapter 11, attorneys' fees were usually a minimum of $50,000.
A charge off is justified when the SBA has complied with all requirements of collection and liquidation and further collection of any substantial portion of the debt is doubtful. The determination to justify a charge off may be based on one or more of the following:a) All efforts must have been exhausted in cost-effective recovery from:1. Voluntary payments from the borrower;2. Liquidation of collateral;3. Compromise with obligor leaving only a deficiency balance; and4. Consideration has been given to any legal remedies available so that no further reasonable expectation of recovery remains.b) Estimated costs of future collection exceed any anticipated recovery;c) Obligor cannot be located or is judgment proof;d) The Lender/SBA’s rights have expired (e.g., statute of limitations, restrictions of State law, SBA policy);e) Debt is legally without merit;f) Adjudication of a Chapter 7 Bankruptcy as a no asset case, or completion of Chap 11/13 case;g) The inability of the Lender to effect further worthwhile recovery.
When you fail to make payments on your SBA loan, the bank or CDC will start contacting you asking for payment. Eventually, if non-payment continues, and you fail to cure the “default”, the bank or CDC may seek to collect on its collateral. This could include monies contained in an account housed at the same bank, your account receivables, your business equipment, real estate, even your home if you used a mortgage beyond the homestead exemption limits. You can expect that the bank or CDC will aggressively seize pledged collateral because the SBA requires the lender or CDC to take all appropriate steps to collect as much of the debt as it can before tendering a claim to the SBA for the balance. And if the United States Department of Treasury receives your account, then you can expect more aggressive collection action, and possibly, full-fledged litigation.
If a Borrower or Obligor does not respond to the opportunity to submit an Offer in Compromise, they may be referred to the U.S. Department of Treasury for various enforced collection activities.
SOP 50 51 2A, Ch. 17, 8-12 states that “[a]ny settlement amount must bear a reasonable relationship to the present value of the estimated amount of recovery available through foreclosure (using a forced sale equivalent value) and enforced collection. This value, combined with the earning potential of the debtor, will form the basis for the offer in compromise.“ Litigative risks” involve answering certain legal questions as to the actual liability of the debtor and will be thoroughly explored by the SBA, if raised properly. The degree of doubt coupled with the potential costs, expenses and time involved in pursuing collection matters will generally determine the acceptable amount for a settlement. Thus, when considering an SBA OIC, it is very important for your qualified representative (who should have a background in litigation and thus be an attorney and have a working knowledge of SBA matters) to be able to advise SBA debtors regarding litigative risks and the costs associated with litigation and how all of these factors can impact the proposed offer to the Federal Government.
.jpg)
