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.
Clients obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
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.
Our firm successfully resolved an SBA COVID-19 Economic Injury Disaster Loan (EIDL) in the original amount of $150,000 for a Florida-based borrower. The loan, issued on June 4, 2020, was secured by business assets and potential personal liability through the SBA's Security Agreement.
Following the permanent closure of the business, we guided the client through the SBA’s Business Closure Review process and prepared a comprehensive collateral analysis. We negotiated directly with the SBA, obtaining a full release of the business collateral for $2,910 — satisfying the borrower’s obligations under the Security Agreement and eliminating any further enforcement risk against the pledged assets.
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