Whether you have defaulted on an SBA loan or have moved on from your business partners options exist for eliminating your debt.
Book a Consultation CallIf your business obtained an SBA loan, you more than likely signed a personal guarantee. This personal guarantee states that although the business was the borrower for the loan, you remain personally liable if the business defaults on the SBA loan.
If you were a partner in a business and left the business, were bought out of the business or gave the business to your spouse as part of a divorce the personal guarantee means you remain liable for the debt even thought you have nothing to do with the business.
In either case, you need a strategy to resolve your personal liability on the SBA debt.
If the business defaulted on the SBA loan and the SBA seeks satisfaction from you personally, an offer in compromise exists as a solution. An offer in compromise means that you offer to settle the debt from something less than the deficiency.
The amount of the compromise will depend on many factors such as your assets and liabilities; your income and expenses; the amount the government could collect from you through enforced collection; and "litigative risks" the government faces if it did attempt to enforce collection. Every situation and fact pattern is unique. The range for an offer in compromise can be as little as 2 cents on the dollar and as high as 90 cents on the dollar.
An alternative to the offer in compromise is the repayment plan. If your income is too high relative to the debt, for instance, the SBA may reject an offer in compromise. A repayment plan allows you to repay the debt in full over time.
The benefits of a repayment plan include: 1. Preserving liquidity; 2. Preserving the opportunity to obtain government backed loans in the future such as FHA, VA or SBA loans; and 3. May affect your credit score less.
If, however, the business remains operational but you are no longer involved in the business due to buyout, divorce, etc., you will want the SBA to release you from your guarantee. This is easier said than done.
The SBA will naturally want something in return to let you out of your personal guarantee. Moreover, the release must not: jeopardize the ability to maximize recovery on the loan; shift the risk of loss to SBA; or otherwise harm the integrity of the SBA loan program. This means that a release will require that the SBA remain in as good or better position after the release than before the release. Without some type of consideration for the release such as the substitution of another guarantor, it is unlikely that the SBA will approve the request.
Protect Law Group successfully handles SBA loan matters for clients all over the nation. Our attorneys are experienced in dealing with the SBA and have the knowledge to successfully resolve your SBA loan problem.
Contact us today at 833-428-0937 to set up your consultation or contact us at www. sba-attorneys.com
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 obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $140,000 on behalf of a husband-and-wife guarantor pair. The business had closed following a prolonged decline in revenue, leaving the borrowers personally liable for the remaining balance.
After conducting a comprehensive financial analysis and preparing a detailed SBA Offer in Compromise (SBA OIC) package, we negotiated directly with the SBA and the lender to achieve a settlement for $70,000 — just 50% of the outstanding balance. This settlement released the borrowers from further personal liability and allowed them to move forward without the threat of enforced collection.
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.
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