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.
Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency. After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.
Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral. One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.
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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