Contact Our SBA Attorneys for Nationwide Representation of SBA and Treasury Debt Problems
Book a 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 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 Case Evaluation.
Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $140,000 on behalf of a husband-and-wife guarantor pair. The business had closed following a prolonged decline in revenue, leaving the borrowers personally liable for the remaining balance.
After conducting a comprehensive financial analysis and preparing a detailed SBA Offer in Compromise (SBA OIC) package, we negotiated directly with the SBA and the lender to achieve a settlement for $70,000 — just 50% of the outstanding balance. This settlement released the borrowers from further personal liability and allowed them to move forward without the threat of enforced collection.
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