Will the SBA Accept My Offer in Compromise?
Explore the factors influencing SBA's decision on your Offer in Compromise. Learn how to improve your chances of acceptance and manage your defaulted loan effectively.
Learn to navigate the complex legal and financial challenges of selling your business after an SBA loan default. Expert tips to manage risks and secure favorable outcomes.
Have you ever wondered what steps to take after defaulting on a Small Business Administration (SBA) loan, especially when considering selling your business assets? This is a common concern for many business owners. While the answer might seem straightforward, navigating the legal and financial complexities requires careful planning and expert guidance.
A security interest is a legal right granted to the lender over your business property, typically used as collateral. This agreement ensures the lender can seize the collateral if you default on the loan, minimizing their financial risk.
When closing an SBA loan, lenders often file a UCC-1 financing statement, placing a blanket lien on your business assets. This document publicly declares the lender's right to seize and sell assets to recover the debt. Before selling any pledged assets, you must repay the loan or obtain explicit permission from the lender.
Before proceeding, consult with your attorney. They may recommend drafting a non-binding Letter of Intent (LOI) to present to your lender. This document outlines your intentions and allows the lender to evaluate the offer before approving the sale.
Never sign a sales contract without your attorney's review. Most sales require a "condition precedent," which is written consent from the lender approving the sale terms, including prices and asset lists. This ensures all parties are aligned and avoids future disputes.
If your offer is rejected, consult your attorney to reassess your options. Without lender approval, the lien remains, preventing you from providing a clear title to the buyer.
Buyers often require assurances that assets are free of liens. Achieving this depends on successful negotiations with the lender, emphasizing the importance of a strategic approach.
Selling assets without lender approval can lead to lawsuits or even criminal charges. Always act in compliance with legal requirements to avoid severe repercussions.
Engage experienced legal professionals to review offers and guide you through the process. Their expertise ensures compliance with regulations and protects your interests.
Maintain open communication with your lender. Transparency about your financial situation and intentions demonstrates responsibility and fosters cooperation.
Work with your attorney to draft a consent agreement that satisfies both your needs and the lender's interests, facilitating a smooth sale process.
Review your loan documents with your attorney to understand all constraints and obligations. This ensures you are fully prepared for negotiations.
Disputes may arise despite careful planning. Maintain detailed records and prepare for potential challenges to save time and resources.
Protect Law Group specializes in assisting individuals and businesses facing SBA loan challenges. Their experienced attorneys provide tailored solutions to navigate legal and financial complexities. By prioritizing informed decision-making and seeking expert guidance, you can streamline the process, mitigate risks, and achieve favorable outcomes. Contact Protect Law Group at (833) 428-0937 for a case evaluation and personalized support.
Facing the challenges of selling your business after an SBA loan default can feel overwhelming, but you don’t have to navigate this journey alone. Protect Law Group specializes in providing tailored legal and financial solutions to individuals dealing with SBA loan issues. With a team of experienced SBA attorneys and Federal Agency Practitioners, we are here to help you understand your options, negotiate with lenders, and ensure compliance with all legal requirements. Contact us today at (833) 428-0937 for a case evaluation and take the first step toward resolving your SBA loan challenges with confidence.
A security interest is a legal right granted by the borrower to the lender, allowing the lender to claim the borrower's business property as collateral. This ensures the lender has a way to recover their investment if the borrower defaults on the loan. The lender can seize and sell the collateral to minimize their risk.
When closing an SBA loan, lenders typically place a blanket lien on your business assets. This lien is made effective through a UCC-1 financing statement, which publicly declares the lender's right to seize and sell the assets if you default. To sell any pledged assets, you must either repay the loan or obtain explicit permission from the lender.
If you have a buyer, consult your attorney first. Your attorney may recommend drafting a non-binding Letter of Intent (LOI) to present to the lender. This document outlines your intentions and helps the lender evaluate the offer. Do not sign any sales contract without your attorney's review and the lender's written consent, as this ensures all parties are aligned and avoids future disputes.
If the lender rejects your offer, consult your attorney to reassess your options. Without lender approval, the lien on your assets remains, preventing you from transferring a clear title to the buyer. Negotiating with the lender is essential to meet their requirements and satisfy the buyer's expectations for lien-free assets.
Selling assets without lender approval can lead to severe consequences, including lawsuits from the buyer, lender, or SBA. In some cases, unauthorized sales may be considered fraudulent or deceptive, potentially resulting in criminal charges. Always ensure compliance with legal and financial obligations before proceeding with a sale.
Maintain open and transparent communication with your lender. Clearly explain your financial situation and the reasons for selling the assets. Work with your legal advisor to negotiate a consent agreement that satisfies the lender's interests while enabling you to move forward with the sale. Building a collaborative relationship with the lender is key to navigating this process successfully.
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.
Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
Client personally guaranteed SBA 7(a) loan balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.