SBA Loan Problems: Barriers to the Small Business Loan Market
We provide people who are facing an SBA loan default with solutions. We analyze SBA loan problems and provide solutions such as an SBA offer in compromise.
Explore COVID-19 relief programs for small businesses with Protect Law Group. Discover how PPP and EIDL can support your recovery—get help today!
Book a Consultation CallThe COVID-19 pandemic has profoundly impacted small businesses across the nation, leading to unprecedented challenges and financial hardships. To combat these issues, the federal government introduced various relief programs aimed at providing financial assistance to eligible businesses.
Protect Law Group will delve into key SBA programs related to pandemic relief, focusing on the Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL). By understanding these business debt relief resources, small business owners can navigate recovery more effectively.
As of late 2023, various updates and adjustments have been made to both PPP and EIDL programs to reflect the evolving landscape of economic recovery. Small business owners should stay informed about any new guidelines or extensions offered by the SBA, as these can significantly impact their ability to access business debt relief.
The Paycheck Protection Program (PPP) was designed to help small businesses maintain their workforce during the COVID-19 crisis. By offering forgivable loans to cover payroll expenses, the program aimed to ensure employees remained on the job. Businesses could apply for loans amounting to 2.5 times their average monthly payroll costs, which significantly aided companies struggling to pay their staff during lockdowns and reduced operations. SBA loan lawyers were able to make a profound difference for their clients.
Eligibility for PPP loans was broad, but specific criteria had to be met. Small businesses with fewer than 500 employees, self-employed individuals, and certain non-profits were eligible to apply. It's essential to note that applicants needed to demonstrate that the pandemic negatively affected their business operations, reinforcing the loan's intended purpose of providing much-needed support during tough times.
One of the standout features of PPP loans was their potential for forgiveness. To have their loans forgiven, businesses needed to use at least 60% of funds for payroll costs, while the remaining 40% could cover rent, utilities, and mortgage interest. By following proper procedures and maintaining employee retention, businesses could effectively turn their loans into grants, greatly alleviating financial burdens.
In addition to PPP loans, the Economic Injury Disaster Loan (EIDL) program served as another crucial resource for small business debt relief during the pandemic. EIDLs were designed to provide working capital to cover operational expenses and help businesses regain their financial footing. These low-interest loans became vital for businesses struggling to meet their financial obligations due to pandemic-related disruptions.
To qualify for EIDLs, businesses had to demonstrate substantial economic injury caused by the pandemic, which could include reduced revenue and increased expenses. The application process required businesses to provide essential financial information, including profit and loss statements. As a result, understanding the necessary documentation upfront helped expedite the application process. SBA loan lawyers can help businesses navigate this paperwork.
By leveraging these resources, business owners can better navigate recovery and adapt to a post-pandemic world. Staying informed about current business debt relief is crucial for long-term success, and small business owners should continue to explore their options as they seek to regain stability and growth. Contact Protect Law Group for more detailed information and guidance.
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 7(a) loan for $150,000. He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made. The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.
Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.
The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.
Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.
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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