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What Is An SBA Loan Default?

Understand SBA loan default, its implications and how to tackle it, with the help of expert legal services offered by Protect Law Group in this insightful guide.

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Have you ever wondered, “What is an SBA Loan Default”?

Perhaps you’re currently dealing with financial problems within your business and are fearing the prospect of defaulting on an SBA loan. Let’s take a thorough look at what this entails.

Protect Law Group: A Brief Introduction and Overview

Protect Law Group primarily offers expert legal services that specialize in addressing your SBA and Treasury debt issues. Catering to small business owners and federal debtors throughout the United States, they provide a wide range of services to aid in resolving SBA loans and debt intricacies. These services include:

  • Establishing and implementing proactive strategies to successfully navigate and potentially resolve your SBA debt collection issues.
  • Utilizing legal authorities to advocate for your stance.
  • Reviewing the grounds for filing Appeals Petitions with the SBA OHA.
  • Investigating any factual, procedural, and legal errors and how to prosecute or defend against them.
  • Intervening in response to notices dispatched by or on behalf of the SBA regarding administrative offset, federal salary offset, federal contractor pay offset, military pay, pension, or annuity offset.

Nationwide Authorized Representation

Protect Law Group attorneys have the permissions conferred by the Agency Practice Act to represent federal debtors across the country. Their jurisdictions cover the SBA, the SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service. The attorneys are responsible for conducting initial case evaluations and diagnosing your case issues. They also take up the role of educators explaining your options and help in implementing an effective plan designed to resolve your SBA loan problems.

These attorneys follow a strict ethical code and leverage cutting-edge technologies to provide you with relevant information about your case in a cost-effective manner.

Specific SBA-related Services

Protect Law Group offers a variety of services related to SBA loans:

  1. SBA Offer in Compromise (OIC): This service provides qualifying small businesses with the option to settle their SBA debt for a lower amount than what’s owed.
  2. Structured Workout: This is an agreement, negotiated between the SBA and you, extending your repayment period.
  3. Administrative litigation services: Protect Law Group attorneys can represent you in litigation before the SBA Office of Hearings and Appeals.
  4. Negotiation services: Protect Law Group’s skilled negotiators can work with the SBA and lenders to secure the best possible terms for you.
  5. Litigation services: If the SBA sues you, Protect Law Group can review your case and suggest the best course of action.
  6. Cross-Servicing Disputes: The firm can assist you in formally preparing a Petition for Cross-Servicing Dispute if your debt has been transferred to the Treasury’s Bureau of Fiscal Service.

Their aim is to manage your SBA debt in such a way that it causes minimal harm to your business or personal asset base while also avoiding foreclosure, bankruptcy, and other negative outcomes of loan default.

Key Advantages of Utilizing Protect Law Group’s Services

Protect Law Group makes several offerings to their clients, including:

  • Extensive experience and expertise in resolving SBA debts.
  • A track record of resolving millions of dollars in SBA debts through OIC and Negotiated Repayment Agreements.
  • Highly skilled negotiators.
  • The ability to deliver peace of mind during a challenging period.

What sets Protect Law Group apart from others in the industry includes their team of educated attorneys who have mastered the six key principles necessary to resolve your SBA loan problems, and a customer experience that surpasses expectations.

Understanding SBA Loan Default

If you borrow money from the Small Business Administration (SBA), the expectation is for you to repay the full amount. Failure to do so results in the SBA declaring your loan to be in default, which could potentially trigger severe repercussions such as foreclosure, bankruptcy, or seizure of personal assets.

So, if you are currently facing an SBA loan default or carrying a heavy burden of SBA debt, Protect Law Group can help. Don’t hesitate to reach out to them for a case evaluation. Remember, the first step towards resolving a problem is acknowledging its existence and seeking help.

Here are 10 relevant FAQs based on common search queries related to SBA loan defaults:

Common SBA Loan Default Questions

1. What happens if I default on my SBA loan?
When you default on an SBA loan, the lender may demand immediate payment, seize collateral, and the SBA may pursue legal action to recover the debt through personal assets.

2. How long before an SBA loan goes into default?
An SBA loan typically goes into default after 60 days of missed payments, though specific terms may vary by lender.

3. Can I negotiate an SBA loan default settlement?
Yes, borrowers can negotiate an “Offer in Compromise” with the SBA to settle the debt for less than the full amount owed.

4. Will SBA loan default affect my personal credit?
Yes, an SBA loan default will significantly impact your personal credit score since these loans typically require personal guarantees.

5. Can the SBA garnish wages for defaulted loans?
Yes, the SBA has the authority to garnish wages and can collect up to 15% of disposable income through Treasury Offset Program.

6. What assets can the SBA seize in a default?
The SBA can seize business assets, personal property, and bank accounts that were listed as collateral or covered under the personal guarantee.

7. How can I prevent SBA loan default?
Prevention strategies include maintaining open communication with lenders, requesting payment modifications, and seeking professional financial advice early.

8. Is bankruptcy an option for SBA loan default?
While bankruptcy is possible, SBA loans are typically more difficult to discharge than conventional loans, and personal guarantees may still apply.

9. Can I get another SBA loan after defaulting?
Generally, defaulting on an SBA loan makes you ineligible for future SBA loans unless the default is fully resolved.

10. What is an SBA Offer in Compromise (OIC)?
An OIC is a formal proposal to the SBA to settle the debt for less than the full amount owed, typically requiring proof of financial hardship.

 

Frequently Asked Questions

$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.

$383,000 SBA 7A LOAN - NEGOTIATED RELEASE OF LIEN FOR CONSIDERATION

$383,000 SBA 7A LOAN - NEGOTIATED RELEASE OF LIEN FOR CONSIDERATION

Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate  and collect all pledged collateral pursuant to the trust deed instruments.

The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery  to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.

After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.

We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.

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