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Resources For Borrowers Facing SBA Loan Default

Explore vital resources for handling SBA loan default. Learn about legal support, strategies, and solutions to minimize financial impact and protect your future.

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Are you struggling with the daunting possibility of defaulting on your SBA loan? Navigating the complexities of SBA loan defaults can be overwhelming, but understanding the resources and options available to you can make a significant difference. This article provides a comprehensive guide to the resources accessible to borrowers facing SBA loan default, helping you potentially minimize financial repercussions and pursue viable solutions.

Introduction to SBA Loan Default

SBA loans are a critical resource for small businesses, providing necessary capital to foster growth. However, like any financial obligation, there is a risk of default if the borrower is unable to meet the repayment terms. Defaulting on an SBA loan can lead to severe consequences, including significant financial strain and possible damage to personal assets. Hence, it’s crucial to be proactive and informed about the resources available to mitigate these impacts.

Understanding SBA Loan Default

What Constitutes a Default?

A default occurs when you fail to meet the terms of the SBA loan agreement. This can include missing payments, not adhering to loan covenants, or not maintaining required insurance. Once a loan is in default, the lender and SBA have the right to take remedial action, which could include legal proceedings and seizing assets.

Common Reasons for Default

Identifying the reasons for your financial difficulties is essential as part of developing a strategy to address the default. Common reasons for defaulting include cash flow problems, economic downturns, and mismanagement. Understanding these factors is the first step toward rectifying them.

Legal Support from Protect Law Group

Protect Law Group excels in providing legal assistance to borrowers facing SBA loan issues. Nationally recognized for its expertise, the firm offers comprehensive legal services that can help you manage and resolve your SBA debt. Let’s explore the specific services Protect Law Group provides.

Developing Strategies for SBA Debt Collection

The first task is formulating and implementing strategic solutions to counter SBA debt collection actions. Protect Law Group specializes in crafting customized strategies tailored to your specific situation, considering all variables and potential outcomes for optimal resolution.

Legal Authority Application

The application of legal authorities is crucial to reinforce your stance in any litigation or negotiation. Protect Law Group attorneys are skilled in applying pertinent legal principles to support your case effectively, ensuring you have a robust legal framework underpinning your arguments.

Appeals and Litigation

If there are grounds to contest the default, Protect Law Group assists in filing Appeals Petitions with the SBA Office of Hearings and Appeals. This is vital for challenging unfair or erroneous default claims, offering an opportunity to rectify any legal mistakes made during the default process.

Resolving Your Debt: Options and Solutions

SBA Offer in Compromise (OIC)

An SBA Offer in Compromise is a valuable option for borrowers who cannot repay their full loan amounts. This program allows you to settle the debt for less than what is owed. Professionals at Protect Law Group can help determine if this is a suitable option for you and assist in preparing a compelling application.

Structured Workout Agreements

These agreements involve negotiating new repayment terms with the SBA, potentially allowing for extended repayment periods and reduced financial pressure. Protect Law Group’s negotiators work diligently to secure terms that are favorable and realistic for your financial situation.

Administrative Litigation

In some cases, litigation may be necessary. Protect Law Group can represent you in proceedings before the SBA Office of Hearings and Appeals, ensuring your rights and interests are upheld throughout the process.

Mitigating the Consequences of Default

Avoiding Foreclosure and Bankruptcy

The implications of a default can be severe, potentially threatening the viability of your business and personal financial health. Protect Law Group can assist in formulating strategies to avoid foreclosure and bankruptcy, safeguarding your assets and providing peace of mind.

Protecting Your Financial Future

Minimizing damage to your personal and business finances is crucial for long-term stability. Expert legal advice from Protect Law Group can help mitigate these risks by negotiating settlements or alternative payment plans that align with your financial capabilities.

Navigating SBI Loan Default with Expert Assistance

Why Choose Protect Law Group?

Selecting the right legal ally is pivotal when faced with an SBA loan default. Protect Law Group offers numerous advantages, including:

  • Extensive Experience: With years of experience resolving SBA debts, the firm is well-equipped to handle complex cases efficiently.
  • Ethical Standards: Protect Law Group’s commitment to ethical practices ensures that your case is managed with integrity.
  • Use of Technology: Advanced tools and technologies are employed to provide you with accurate and timely information.

Client Experience and Satisfaction

A hallmark of Protect Law Group’s service is their emphasis on client satisfaction. The attorneys prioritize clear communication, ensuring you are informed and comfortable with each step in the resolution process.

Contacting a Legal Professional

Taking the first step toward resolving an SBA loan default often involves consulting with a professional who can provide tailored advice and solutions.

Initial Evaluation and Case Diagnosis

Protect Law Group offers initial case evaluations, where experts diagnose the specific challenges of your situation and explain potential pathways to resolution. They educate you on your options, empowering you to make informed decisions regarding your financial future.

Implementing Effective Plans

Beyond evaluation, the firm aids in implementing comprehensive plans to address your SBA loan challenges. This involves formulating legal arguments, negotiating with creditors, and if necessary, guiding you through litigation processes.

Peace of Mind

Facing an SBA loan default can be immensely stressful. Engaging with experienced professionals can alleviate some of this burden, providing assurance that you have expert advocates committed to your cause.

Conclusion and Next Steps

Navigating the challenges of an SBA loan default is complex, involving legal, financial, and strategic considerations. With the right resources and expert guidance, such as that offered by Protect Law Group, you can effectively manage and potentially overcome these challenges. Whether seeking to negotiate an Offer in Compromise, secure a structured workout, or pursue litigation, having professional support is invaluable. Consider reaching out to a legal expert to discuss your unique situation and develop a plan tailored to your needs.

If you are facing difficulties with an SBA loan default, taking prompt action can help preserve your financial health and safeguard your future. Contacting a professional today could be the pivotal decision that leads to a brighter, more secure financial future.

$375,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

$375,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

The client personally guaranteed an SBA 504 loan balance of $375,000.  Debt had been cross-referred to the Treasury at the time we got involved with the case.  We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.

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$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.

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$150,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

$150,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

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.

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