Should I File an SBA Loan Bankruptcy?
In unprecedented economic times, you may be considering shutting your business. But you have an SBA loan. Does an SBA loan bankruptcy apply to you? Read on.
We Provide Nationwide Representation of Small Business Owners, Personal Guarantors, and Federal Debtors before the SBA and Treasury Department's Bureau of Fiscal Service
Book a Free Consultation CallAn SBA Loan Deferment is a temporary remedial option. If your small business is having short term financial difficulty because of a seasonal slump and can prove through pro forma financial statements to the SBA lender of record or the Certified Development Corporation (CDC) that a turnaround is just around the corner and you need a temporary reprieve from paying on the SBA loan, you should consider applying for a deferment. Generally, if you qualify, the SBA lender or CDC, with the SBA’s approval can provide you with either a three (3), six (6), nine (9) or twelve (12) month reprieve from paying either the principal amount (and allow interest-only payments) or no principal and interest. However, if you consider this option, be advised that you may be asked to reaffirm the loan with personal guarantees or even pledge additional collateral. Needless to say, this is not an option that you should consider without either representation or consultation with a qualified SBA Attorney.
An SBA Loan Modification is a remedial option when the small business is still a viable concern, is still generating revenue but due to current circumstances, the old loan terms no longer make financial sense for all parties involved. A loan modification package is generally presented when it involves an SBA 504 Loan and the pledged collateral or building’s fair market value has decreased significantly such that the loan should be modified (i.e. principal and interest payment terms, modification of principal loan balance to reflect current fair market value appraisal of real estate collateral, payment schedule etc.). In this situation, special factors need to be evaluated, formal appraisals will need to be conducted, and a proposal should be made in order to apply for a loan modification which can benefit both parties. Again, the borrower will be required to provide updated business and personal financial information, additional pledged collateral may be requested, and formal appraisals will be done as part of the modification process. This is not a situation where the borrower or guarantor should engage in this process without qualified representation or consultation. However, if the small business feels that it doesn’t need assistance, we recommend that you review applicable SBA SOPs and the Code of Federal Regulations (CFRs) prior to presenting your loan modification application.
Contact us today for a free Case Evaluation.
An SBA Loan Modification is a remedial option when the small business is still a viable concern, is still generating revenue but due to current circumstances, the old loan terms no longer make financial sense for all parties involved. A loan modification package is generally presented when it involves an SBA 504 Loan and the pledged collateral or building’s fair market value has decreased significantly such that the loan should be modified (i.e. principal and interest payment terms, modification of principal loan balance to reflect current fair market value appraisal of real estate collateral, payment schedule etc.). In this situation, special factors need to be evaluated, formal appraisals will need to be conducted, and a proposal should be made in order to apply for a loan modification which can benefit both parties. Again, the borrower will be required to provide updated business and personal financial information, additional pledged collateral may be requested, and formal appraisals will be done as part of the modification process. This is not a situation where the borrower or guarantor should engage in this process without qualified representation or consultation. However, if the small business feels that it doesn’t need assistance, we recommend that you review applicable SBA SOPs and the Code of Federal Regulations (CFRs) prior to presenting your loan modification application.
Contact us today for a free Case Evaluation.
Clients personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
Client personally guaranteed SBA 7(a) loan balance of over $150,000. Business failed and eventually shut down. SBA then pursued client for the balance. We intervened and was able to present 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 our client’s 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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