SBA Loan Default: How the Guarantee Works with 7a and Express Loans
We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
The Small Business Administration provides homeowners with loans that help in rebuilding a business or home after a natural disaster. However, if the borrower goes into default, the SBA can foreclose. Read further to learn more about the SBA's disaster loans, along with their foreclosure and SBA Offer in Compromise process.
The Small Business Administration offers fixed rate, low interest loans and a Tax Offset Program to fix homes, businesses and property destroyed or damaged in a federal disaster area. Loans may be used to replace or repair:
Business owners, renters and homeowners are all eligible for SBA loans in most cases. The sections below list the most common types of disaster loans, along with the groups of borrowers most likely to benefit.
Homeowners can apply for a loan of up to $200,000 to restore a primary residence to the same condition in which it was before the disaster. Homeowners and renters may borrow $40,000 or less to replace or repair personal belongings such as clothing and furniture that are damaged or destroyed.
The SBA offers loans to business owners who incur financial losses during a natural disaster. These disaster loans can be used to replace or repair non-covered equipment that's lost during a storm, fire or earthquake.
Businesses can also qualify for loans to help pay necessary and recurring operating expenses until things are back to normal. If a business suffers economic losses because of a disaster, it can get a loan even if no damage occurs.
Because disaster help is given as a loan rather than a grant, the borrower must legally agree to a repayment plan. These loans are available directly from the agency or through participating lenders, and are serviced accordingly. For certain loans, borrowers must provide collateral such as a security interest in or a lien on the property. If the person goes into SBA loan default, the loan can be foreclosed in or out of the judicial setting after the borrower receives an SBA demand letter. A lawyer can help a borrower consider options to avoid an SBA loan foreclosure, such as bankruptcy or an SBA Offer in Compromise.
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.
Our firm successfully assisted a client in closing an SBA Disaster Loan tied to a COVID-19 Economic Injury Disaster Loan (EIDL). The borrower obtained an EIDL loan of $153,800, but due to the prolonged economic impact of the COVID-19 pandemic, the business was unable to recover and ultimately closed.
As part of the business closure review and audit, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability for the owner/officer.
This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA Offer in Compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.
Clients personally guaranteed SBA 7(a) loan balance of over $300,000. Clients also pledged their homes as additional collateral. SBA OIC accepted $87,000 with the full lien release against the home.
Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
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