Businesses can suffer from excessive debt, just as individuals can. According to the SBA, almost half of all small businesses fail within the first five years, mostly because of poor credit, excessive debt and insufficient capital. Borrowing is sensible when it’s needed to finance expansion or boost cash flow, but many businesses end up in SBA loan default because they are not able to repay what they owe. Here, business owners can learn their options for dealing with debt, including making an SBA Offer in Compromise
The most ideal option for many is to try to save the business while managing debt. Many business owners take money out of their pockets to fund the company, but this strategy should only be taken if it is likely to pay off in the long term. If the business cannot be saved with an infusion of private funds, the owner must identify ways to cut costs. While layoffs are not the most appealing option, they may be necessary to keep a struggling business afloat.
Business owners should stay in touch with customers, seeking ways to increase exposure and revenue. Offer markdowns to loyal customers if they pay quicker, and contact suppliers to ask for payment arrangements and discounts. If this is done early enough, it may be sufficient to save a struggling company.
The business owner should contact creditors and advise them of the situation. Ignoring an SBA demand letter will make the situation worse, and it is easier to handle debt early on through a Tax Offset Program. It is in everyone’s best interests to find a workable solution, and clients should request lower interest rates, increased credit lines and/or an SBA Offer in Compromise.
Another option is to try to sell the company to repay creditors. It is easier to deal with a single buyer than to go through SBA loan foreclosure, and an orderly sale may free the owner from later obligations once creditors are paid. However, if the business’ debts are more than its assets, it may be hard to find a buyer.
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 executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
Clients borrowed and personally guaranteed an SBA 7(a) loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
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.
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