Learn how to release your personal guarantee on an SBA loan by exploring options like loan assumption, asset sales, and SBA loan modifications to protect your assets.
Protect Law Group specializes in assisting individuals and businesses with SBA loan challenges. If you own at least 20% of a business financed by an SBA loan, you may already understand the commitment involved. A personal guarantee means pledging to repay the lender—and possibly the government—if your business defaults. This responsibility is significant, but there are ways to potentially release yourself from this obligation if your business faces financial instability.
A personal guarantee is a legal promise by business owners to repay an SBA loan if the business cannot. It provides lenders with additional security and is often a necessary step to secure financing.
Lenders require personal guarantees to mitigate risk. Small businesses can be unpredictable, and a personal guarantee offers lenders a secondary recourse if the business fails to meet its obligations.
Accepting a personal guarantee puts your personal assets—such as your home, savings, and other property—at risk if the business defaults. Understanding these stakes is crucial before committing to a personal guarantee.
Protect Law Group offers solutions for those seeking to release personal guarantees. Here are some options:
A third party may assume your business and the associated SBA loan, potentially releasing your personal guarantee. This requires lender approval and negotiation.
Selling business assets to a third party for fair value can allow you to settle the remaining balance through an SBA Offer in Compromise. This process can relieve debts and obligations tied to the personal guarantee.
Modifying your SBA loan terms can rejuvenate your business. Adjustments to the balance, payment terms, or interest rate can provide relief and reduce the threat of personal liability.
Failing to uphold a personal guarantee can lead to severe consequences:
Protect Law Group emphasizes the importance of being proactive if financial trouble arises. Early action can prevent default and open discussions with lenders.
Contacting your lender early can lead to solutions or guidance. Presenting a clear financial picture may encourage lenders to work out terms to avoid default.
Consulting financial advisors or SBA loan default attorneys can provide insights and alternatives. Protect Law Group’s experienced attorneys can guide you through policies and procedures to manage obligations.
Your business may qualify for SBA debt relief programs. These programs can reduce financial burdens and restructure repayment terms, offering significant relief.
If default is unavoidable, understanding the SBA collections process can help you prepare and make informed decisions.
The process begins with lender notifications about missed payments, offering opportunities to negotiate new terms or payment plans.
If the lender charges off your debt, it may be transferred to the U.S. Treasury for collection. This can result in administrative actions like offsetting tax refunds or federal payments.
Protect Law Group is dedicated to helping clients navigate the complexities of SBA loans and personal guarantees. By staying informed, communicating with lenders, and seeking professional guidance, you can protect your business and personal interests. Whether through modifications, assumptions, or asset sales, understanding your options empowers you to make sound financial decisions aligned with your goals.
Contact Protect Law Group at (833) 428-0937 for personalized support and case evaluations.
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Are you feeling overwhelmed by the weight of a personal guarantee on your SBA loan? Protect Law Group is here to help. With a team of experienced SBA Attorneys and Federal Agency Practitioners, we specialize in guiding business owners through the complexities of SBA loan challenges. Whether you're exploring options like loan assumptions, asset sales, or SBA loan modifications, our experts provide tailored solutions to help you navigate these critical decisions. Contact us today at (833) 428-0937 for a case evaluation and take the first step toward financial relief and peace of mind.
A personal guarantee on an SBA loan is a legal promise made by business owners to repay the loan if their business cannot. It provides lenders with an additional level of security and ensures that the borrower is personally liable for the loan repayment.
Lenders require personal guarantees to mitigate risk. Since small businesses can be unpredictable, a personal guarantee offers lenders assurance that they have a secondary line of recourse if the business fails to meet its loan obligations.
Signing a personal guarantee means that your personal assets, such as your house, savings, and other property, are at risk if your business defaults on the loan. This can have significant financial consequences for your personal life.
Options to release a personal guarantee include loan assumption, where a third party takes over the loan; selling business assets and settling the remaining balance through an SBA Offer in Compromise; or pursuing an SBA loan modification to adjust loan terms and potentially stabilize the business.
Failing to honor a personal guarantee can lead to legal action by the lender, referral of the debt to the U.S. Treasury for collection, wage garnishment, and damage to your personal credit score, which can affect your future borrowing capacity.
Business owners can proactively manage challenges by communicating with lenders early, seeking professional advice from financial advisors or SBA loan default attorneys, and exploring debt relief options such as SBA programs designed to restructure repayment terms.
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.
Clients personally guaranteed an SBA 504 loan balance of $337,000. The Third Party Lender had obtained a Judgment against the clients. We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.
Client personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture. After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against his monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars. We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA). As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy) but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.
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