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.
The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.
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 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.
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