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You have a business with an SBA guaranteed 7(a) loan and now you are looking to sell the business. What about the loan? Can you simply assign the loan and have the buyer assume the loan in your sale documents without anything more? Generally speaking, the SBA will need to approve the assumption and certain requirements must be met:
1. Unless the assumption is part of a workout or the loan is in liquidation status, the proposed assumptor must meet the applicable 7(a) Loan eligibility requirements in the most current version of the SBA’s standard operating procedures;
2. The proposed assumptor should be the primary owner of the business;
3. The proposed assumptor should have business experience and management skills that are equal to or better than the Borrower's;
4. The proposed assumptor must have a satisfactory credit history;
5. The proposed assumptor must have the ability to repay the SBA loan in full;
6. No collateral should be released;
7. No collateral should be subordinated except as otherwise provided with regard to funds that will be used to make improvements to the collateral that will maintain or increase its value;
8. The proposed assumption should not have a negative impact on the operation of the business;
9. The proposed assumption must not have a negative impact on the recoverable value of the collateral;
10. The existing collateral should be adequate to secure the loan, if not and whenever possible, additional collateral should be required as a condition for the assumption;
11. Existing Obligors must not be released without SBA’s prior written approval;
12. The terms of the assumption must be set out in a written agreement signed by all of the parties to the agreement;
13. The terms of the assumption must include a "due on sale or death" clause that prohibits any future assumption of the SBA loan; and
14. The terms of the assumption must not include a real estate contract, i.e., the seller may not retain title to the property until an agreed upon amount is paid.
If you are facing an SBA loan default, contact Protect Law Group today at www.sba-attorneys.com or 1-888-756-9969 to schedule your FREE initial consultation.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
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.
The clients are 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.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $212,000 on behalf of an individual guarantor. The borrower’s business experienced a significant downturn in revenue and was unable to sustain operations, ultimately leading to closure and a remaining personal guaranty obligation.
After conducting a thorough financial review and preparing a comprehensive SBA Offer in Compromise (SBA OIC) submission, we negotiated directly with the SBA and lender to achieve a settlement of $50,000—approximately 24% of the outstanding balance. This favorable resolution released the guarantor from further personal liability and provided the opportunity to move forward free from the burden of enforced collection.
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