If you Owe more than $30,000 contact us for a case evaluation at 888-756-9969
contact us for a free case evaluation at (833) 428-0937
Call us (833) 428-0937

Options For Dealing With SBA Loan Defaults

Explore strategies to manage SBA loan defaults and protect your assets. Learn expert tips from Protect Law Group to navigate complex financial challenges effectively.

Schedule a Consultation

Have you ever found yourself overwhelmed by the complexities surrounding an SBA loan default? Navigating the landscape of SBA loan defaults can be daunting, especially when the financial stability of your business is on the line. Understanding your options is essential for mitigating risks and protecting your assets. This article aims to provide you with professional insights into managing SBA loan defaults effectively, with guidance from the expertise of Protect Law Group.

Understanding the Nature of SBA Loan Defaults

Small Business Administration (SBA) loans are a financial lifeline for many small businesses. They offer the opportunity for growth and sustainability through favorable terms and conditions. However, when a business faces financial difficulties and defaults on an SBA loan, the implications can be substantial. A default occurs when a borrower fails to meet the agreed repayment terms, triggering a series of actions from the SBA and lenders to recover outstanding debts.

Legal Framework Governing SBA Loan Defaults

The legal landscape for SBA loan defaults is complex. Federal regulations and SBA policies dictate the procedures for handling defaults. This includes potential actions such as administrative offsets and debt collection processes enforced by the Treasury Department. Having a knowledgeable legal partner like Protect Law Group can help navigate these regulations, ensuring that you understand your rights and obligations in this challenging situation.

The Role of Protect Law Group in SBA Loan Default Management

Protect Law Group specializes in providing legal services to small business owners facing SBA loan defaults. With expertise in SBA and Treasury debt issues, their attorneys are equipped to offer strategic advice and representation for federal debtors across the United States. Their experience encompasses a wide range of services designed to defend and resolve SBA debt collection matters, protecting both personal and business assets.

Exploring Your Options for Resolving SBA Loan Defaults

Faced with an SBA loan default, understanding your options can prevent irreversible damage to your business and financial standing. Below are several strategies offered by Protect Law Group to address SBA loan defaults:

SBA Offer in Compromise (OIC)

An Offer in Compromise (OIC) permits eligible businesses to negotiate a settlement for their outstanding SBA debt for less than the total amount owed. This option is ideal for businesses that can demonstrate financial hardship and inability to pay the existing debt in full. The lawyers at Protect Law Group can assist in preparing a compelling case to present to the SBA, increasing the probability of a favorable outcome.

Structured Workout Agreements

A structured workout agreement allows you to modify the existing terms of your SBA loan, offering an extended payment period or reduced monthly payments. This negotiated agreement is beneficial for businesses looking to manage cash flow more efficiently without defaulting further. Protect Law Group can guide you in negotiating terms that align with your financial capability and business goals.

Administrative Litigation and Appeals

If a resolution cannot be reached through negotiations, administrative litigation may become necessary. Protect Law Group can represent you in legal proceedings before the SBA Office of Hearings and Appeals (OHA). Their attorneys can also file Appeals Petitions with the OHA if there are grounds on which to contest the SBA’s decisions. This approach ensures that all avenues for a fair resolution are pursued.

Strategic Responses to SBA Debt Collection Actions

When faced with SBA debt collection efforts, it’s crucial to respond strategically to minimize adverse outcomes. Protect Law Group provides several services in this area:

Negotiations and Settlements

The skilled negotiators at Protect Law Group can work with SBA lenders to secure the best possible terms for your debt repayment. Leveraging their expertise in negotiation, they aim to reduce your financial burden while maintaining good relationships with creditors, which is vital for future business dealings.

Cross-Servicing Disputes

In instances where SBA debt has been transferred to the Treasury’s Bureau of Fiscal Service, cross-servicing disputes may arise. Protect Law Group can help you prepare a formal Petition for Cross-Servicing Dispute, challenging the transfer and collection efforts. This proactive step can protect your assets from aggressive collection tactics.

Intervening in Offset Actions

Protect Law Group is well-versed in intervening against offset actions initiated by the SBA. These actions may include administrative offset, federal salary offset, and other forms of offset against federal payments. By intervening, they can prevent or mitigate the impact of these offsets on your business or personal financial health.

Avoiding Severe Consequences of SBA Loan Defaults

Protect Law Group offers solutions that aim to prevent severe outcomes such as foreclosure and bankruptcy. Their methods focus on safeguarding the long-term health of your business by finding manageable solutions to debilitating debt.

Mitigating Risk to Personal and Business Assets

One of the primary concerns in dealing with SBA loan defaults is protecting personal and business assets. Protect Law Group employs strategies to minimize asset loss, ensuring that your business remains operational and your personal financial security is not compromised.

Educating Clients on Their Financial Options

Protect Law Group excels in educating their clients about available options and potential outcomes. Understanding the nuances of SBA loan default management empowers you to make informed decisions about the best path forward for your business.

Preserving Business Reputation and Relationships

Defaults can damage a company’s reputation and strain relationships with lenders and investors. Protect Law Group’s approach ensures that these relationships remain as intact as possible, allowing for continued business operations and future borrowing opportunities.

Protect Law Group: A Partner in Debt Resolution

Choosing the right partner to manage SBA loan defaults is crucial. Protect Law Group differentiates itself from other legal firms through:

Expertise and Experience

With years of experience resolving millions in SBA debts, Protect Law Group attorneys bring unparalleled knowledge to your case. Their understanding of federal debt laws and SBA regulations informs every part of their strategic approach.

Tailored Client Solutions

Recognizing that every client’s situation is unique, Protect Law Group offers customized solutions. Their attorneys take the time to understand your specific circumstances, creating a tailored strategy that aligns with your business objectives and financial reality.

Comprehensive Support and Communication

Open communication is a cornerstone of Protect Law Group’s service. From initial evaluations to ongoing case management, they maintain transparent dialogue, ensuring you are informed and comfortable with the proceedings.

Conclusion

Navigating the complexities of SBA loan defaults requires a strategic and informed approach. By leveraging the expertise of Protect Law Group, you can explore various options for mitigating the impacts of a default, protecting your business, and maintaining financial stability. Whether through negotiation, litigation, or other legal avenues, understanding your rights and options is the first step toward resolving SBA debt issues effectively. Contacting a specialized legal partner like Protect Law Group can provide the support and guidance necessary during such challenging times.

Frequently Asked Questions

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

Client’s small business obtained an SBA 7(a) loan for $750,000.  She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance.  The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance.  However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.

$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.

Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.

The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.

The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.

$391,000 SBA COVID EIDL - CROSS-SERVICING DISPUTE | NEGOTIATED REINSTATEMENT & WORKOUT

$391,000 SBA COVID EIDL - CROSS-SERVICING DISPUTE | NEGOTIATED REINSTATEMENT & WORKOUT

Client's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement.  The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.  

The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.

The Firm was hired to investigate and find an alternate solution to the bankruptcy option.  After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.

Read more Case Results
Providing real solutions to individuals who are facing SBA loan problems. Contact one of our experienced SBA Attorneys and Federal Agency Practitioners today for a Case Evaluation today at - 888-756-9969
©2025 Protect Law Group, All Rights Reserved.Design by T. Walker Consulting, Inc.