Is There A Way to Get Out of An SBA Loan?

Whether you have defaulted on an SBA loan or have moved on from your business partners but still remain liable for an SBA loan, options exist for eliminating your debt.

Your Liability for an SBA Loan

If 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.

Offer in Compromise

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.

Repayment Plan

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.

Personal Guarantee Release

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 Provides Experienced, Assertive Legal Representation

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.

If You Owe More than $30,000 Contact us for a Free Case Evaluation at: (833) 428-0933