How To Take Advantage Of CARES Act Provisions For SBA Loan Defaults
Discover how to mitigate SBA loan defaults using CARES Act provisions. Learn about deferral, forgiveness options, and legal strategies for financial resilience.
Discover how to navigate financial challenges with a forbearance agreement. Learn steps and legal insights to apply, and protect your financial future today.
Have you ever found yourself grappling with seemingly insurmountable financial burdens due to SBA loan obligations? In challenging times, understanding and effectively navigating options such as forbearance agreements can make all the difference. A forbearance agreement can provide short-term relief by temporarily pausing your loan payments, offering you some much-needed breathing room to reorganize your finances. This article will guide you through the nuances of applying for a forbearance agreement, so you can make informed decisions about your financial future.
A forbearance agreement is a temporary agreement between you and your lender that allows you to pause or reduce your monthly loan payments. It serves as a short-term solution for those facing financial difficulties, such as a temporary loss of income or unexpected expenses. During the forbearance period, interest may continue to accrue, so it’s essential to understand the full scope of the agreement.
Considering a forbearance agreement becomes important when you are unable to meet your loan payment obligations due to temporary financial constraints. While it doesn’t reduce the overall debt, it provides an opportunity to stabilize your finances, avoid default, and potentially prevent more severe consequences like foreclosure or bankruptcy.
Protect Law Group specializes in offering legal services that address SBA and Treasury debt issues. Their attorneys are well-versed in representing small business owners and federal debtors, providing strategic support across the United States.
Some of the key services offered by Protect Law Group include:
The firm represents clients under the Agency Practice Act, allowing them to act on behalf of federal debtors nationwide in dealings with entities such as the SBA, the Treasury Department, and the Bureau of Fiscal Service.
Protect Law Group boasts extensive experience in resolving SBA debts, often minimizing damage to personal or business assets. With a formidable record of resolved debts through Offers in Compromise and Negotiated Repayment Agreements, their expertise can be crucial in navigating complex financial challenges.
The first step in applying for a forbearance agreement is understanding your specific financial situation and contacting your lender to discuss the available options. It’s essential to be prepared with documentation that demonstrates your financial hardship, such as income statements, expense reports, and any relevant correspondence showing attempts to rectify the financial situation.
Gathering the necessary documentation is vital for a successful application. This typically includes:
Eligibility depends on various factors, including the type of loan, specific lender policies, and the reasons for financial difficulties.
Engaging with experienced attorneys, such as those at Protect Law Group, can be advantageous. Skilled negotiators can work with your lender to secure favorable terms in your forbearance agreement, which can include the duration of payment suspension, potential payment reductions, and terms for resuming payments.
Forbearance agreements generally have a set duration, often three to six months. It is crucial to understand these timelines and explore possibilities for extensions if your financial situation does not improve as anticipated. Open communication with your lender and legal advisor is key during this time.
While entering a forbearance agreement is not typically reported negatively on your credit history, the conditions might affect the overall creditworthiness. It’s essential to fully understand the terms and protect your credit as much as possible during and after the forbearance period.
Legal representation offers several benefits, including:
An Offer in Compromise allows you to settle your SBA debt for less than what is owed. This option, typically suited for those with substantial debt burdens, requires thorough documentation to convince the lender of your inability to pay the full amount.
Another alternative is a structured workout, in which a negotiated agreement allows you to repay the debt over a longer period. This approach offers the benefit of smaller, more manageable payments that may align better with your financial capabilities.
For more complex situations, administrative litigation might be necessary. In these cases, Protect Law Group can represent clients before the SBA Office of Hearings and Appeals, ensuring your interests are thoroughly advocated.
Failing to address SBA loan issues could lead to severe consequences, including foreclosure of assets, bankruptcy, or damaging your personal and business credit. Utilizing legal services to navigate these waters ensures you are taking proactive steps to avoid such outcomes.
Having a legal expert assist you not only increases your chance of a favorable outcome but also provides peace of mind. During such tumultuous times, knowing that your case is being handled by professionals who prioritize your best interests can be a relief.
Applying for a forbearance agreement is a strategic step for those experiencing temporary financial hardships. Understanding the implications and working with legal professionals can lead to an effective resolution that maintains your financial health. If you face such challenges, consulting with experts like those at Protect Law Group can be instrumental in achieving a positive outcome. Remember, timing and informed decision-making are crucial in navigating the complexities of SBA loans and ensuring long-term stability.
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 negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.
The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.
Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.
Our firm successfully facilitated the SBA settlement of a COVID-19 Economic Injury Disaster Loan (EIDL) f borrower received an SBA disaster loan of $150,000, but due to the severe economic impact of the COVID-19 pandemic, the business was unable to recover.
Despite the borrower’s efforts to maintain operations, shutdowns and restrictions significantly reduced the customer base and revenue, making continued operations unsustainable. After a thorough business closure review, we negotiated with the SBA, securing a resolution where the borrower paid only $6,015 to release the collateral, with no further financial liability for the owner/officer.
This case demonstrates how businesses affected by the pandemic can navigate SBA loan settlements effectively. If your business is struggling with an SBA EIDL loan, we specialize in SBA Offer in Compromise (SBA OIC) solutions to help close outstanding debts while minimizing financial burden.