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We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
The SBA can help advance such entrepreneurs small loans to give their firms a chance at thriving again. But you will have to sign a personal guarantee.
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One-quarter of all small business owners are unable to access the funding they need to keep their companies afloat. For such entrepreneurs, this is akin to a death sentence for their organizations.
Small loans for businesses in the infancy stages of operations are critical in helping them weather torrential waters.
Even though entrepreneurs get into business knowing it carries a lot of risks and challenges, a lack of adequate funding can stall even the best of them.
If your small business is facing financial headwinds here are some instances where a Small Business Administration (SBA) loan can give you a reprieve.
Life can throw unexpected curves your way. Imagine waking up one day and getting a notice that your business partner wants out. Although you had not seen it coming, you are now on the hook for their stake to retain ownership.
Such a turn of events can put pressure on your firm and its finances if it does not have a strong enough balance sheet. An SBA loan can help you navigate these unforeseen waters.
In the past, getting an SBA loan to buy out a partner was quite tricky. In the eyes of the SBA, a buyout via stock or partnership interest meant that the accounting requirement would leave the firm with a negative equity position.
As a result, an existing partner required a massive infusion of capital to qualify for an SBA loan to buy a partner out.
In 2018 the SBA adopted the Standard Operating Procedures 50 10 5(J). The new policy now made a partner buyout more realistic.
It updated the rules so that one could qualify for a loan to buy out a partner if this left the firm's balance sheet with a minimum equity position after the sale.
The minimum equity position post-sale now has to be at least 10% of the firm's total assets.
If you need to buy out your partner, you can now do so without an equity injection. There are however two qualifications you will need for this to happen:
In case these two conditions are not met, the partner who wants to make the purchase needs at least ten percent equity to qualify.
Consider an SBA loan if you need to unexpectedly partner buyout, and you don't have enough personal finances for it.
Debt financing for small businesses` can be a useful tool in catalyzing growth. It can help your firm tap into resources that it didn't have to increase its scope of operation and ultimately revenue.
But when circumstances lead to a downturn in your firm's finances, then the previously affordable interest rates might become unaffordable.
Unless you find a way to staunch the bleeding your business might suffer irreparable damage.
The SBA through its 7(a) loan program can help you refinance your high-interest loan by giving you a lower interest one. Despite its availability, this type of SBA loan can take more time than expected to process.
If you determine that your small business needs to refinance for lower interest payments it is best you apply in good time.
The 7(a) SBA loan is processed through specialized lenders, banks and credit unions that partner with the SBA. You should, therefore, prepare for a higher degree of due diligence from these third-party providers before getting the loan.
When a small business is in its infancy, the founder might have some cash to bankroll its operations. As time goes by however the founder's resources might be stretched thin just as the firm is beginning to hit its stride.
To sustain the momentum the business has generated, you might have to seek outside funding. SBA loans are uniquely suited to companies in such scenarios.
A relatively lower cost SBA loan can help you extend the finance runway for your business beyond what you have in hand. Such a reprieve might make the difference between blooming and shrinking.
One of the most famous examples of the SBA coming to the aid of such a business is with the athletic apparel firm Under Armour.
Founded over 20 years ago Under Armour started in the founder Kevin Plank's grandmother's basement. By 1996, Kevin had helped the fledgling firm generate $17,000 via its first team sale.
The SBA then gave Under Armour a loan that helped keep the firm going beyond what the cash in its coffers could deliver.
Needless to say that extra lifeline helped make a big difference leading to its present-day multinational and multi-billion-dollar company status.
In the face of small beginnings, the SBA through its loan programs can help keep your small business going for greater success.
Whenever natural disasters strike, businesses across different sectors, suffer due to the interruption in their operations.
More than just interruptions, small businesses may not have the financial capacity to support their disaster recovery efforts. The SBA seeks to give small companies facing disaster recovery financial challenges a helping hand.
Through its disaster loans program, The SBA finances up to $2 million to aid in recovery efforts. Unlike its other loan programs, the SBA directly processes these kinds of loans.
These funds can be applied in repairing or replacing mission-critical assets affected by the disaster. The funding can also go to building up the capital pool of the firm to sustainably resume operations.
Many small business owners grapple with finding adequate funding to run their businesses sustainably.
Not having the necessary financial resources stacks the odds against small firms. The SBA can help advance such entrepreneurs small loans to give their firms a chance at thriving again.
But you will have to sign a personal guarantee. This means that if your business defaults, the SBA will hold you personally liable for the debt. Moreover, the SBA may require that you pledge your personal home as collateral for the loan.
At Protect Law Group we can help if you do default on an SBA due to unforeseen circumstances. Contact us today to have our experienced team help you assess your SBA loan default situation.
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 $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
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.
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