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.
Book a Consultation CallSmall Loans
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 an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral. One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
.jpg)
.jpg)