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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.
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.
Our firm successfully assisted a client in closing an SBA Disaster Loan tied to a COVID-19 Economic Injury Disaster Loan (EIDL). The borrower obtained an EIDL loan of $153,800, but due to the prolonged economic impact of the COVID-19 pandemic, the business was unable to recover and ultimately closed.
As part of the business closure review and audit, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability for the owner/officer.
This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA Offer in Compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.
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.
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