When you start a business, the last thing on your mind is that it will fail! After all, you’ve put in so much time and effort to help it succeed. However, not all businesses are successful, but nearly every business must take out loans. But what happens to those loans if the business fails, and what does SBA loan default entail?
Here at Protect Law Group, our SBA debt attorneys are here to help you find realistic solutions to your SBA loan debt. We want you to resolve your debt problems, and we also know that navigating the US Treasury Debt Collection process can be challenging. Learn more about paying back an SBA loan after a business fails, and if you owe more than $30,000 and you’d like to schedule a consultation with one of our SBA debt attorneys, contact us today.
Business loan default can be overwhelming, but what exactly does default mean? If you’ve missed one payment, that doesn’t necessarily mean you are defaulting on your loan. Most lenders define default loans as missing two to three payments, and they will then report you to a credit agency, which will record any further missed payments.
Ultimately, each small business lender considers loan default at different points, and you’ll need to look at your loan agreement to determine what that point is for your particular small business loan. If your loan defaults, they will reach out to you and ask why you have missed your payments or offer options for creating a more realistic payment schedule. Ideally, you should be able to get back on track, but if your business has failed, that will make it much more difficult.
Like any loan, the more payments you miss, the more aggressive collections practices your lender will attempt. Those practices will also change depending on the amount you own or how long you have been missing payments.
If your loan is backed by collateral, like your business equipment, the lender may take that equipment to recoup some of the money you owe. If your business has failed, you may be able to cover the amount of money you owe by selling off your assets, since you no longer need them to run your business.
If you have made a personal guarantee on your business loan, then the stakes are even higher. A personal guarantee means that you personally are responsible for repaying the loan, even if your business has failed and cannot pay back the loan. Depending on the situation, your lender can come after your personal assets rather than just the business assets.
An SBA loan has a different process than other types of business loans, and the lender will submit a claim to the Small Business Administration after collecting the collateral associated with the loan. The SBA will pay the lender for the portion of the loan that they have guaranteed, and then contact you to create a plan for repaying your debt with the SBA directly. The SBA guarantees up to 75% to 85% of business loans, and You may be able to negotiate a smaller payment, and our SBA lawyers can help make that possible.
If your business has failed and you are feeling overwhelmed by debt, our debt attorneys are here to help. We can provide you with realistic solutions to SBA loan problems and get you back on track. We look forward to working with you and helping you through this stressful period!
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.
Client personally guaranteed SBA 7(a) loan balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.
The client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. The client received the SBA's Official 60-day notice with the debt scheduled for referral to the Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-day notice, and prevent enforced collection by the Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.