If you Owe more than $30,000 contact us for a case evaluation at (833) 428-0937
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Do You Have To Pay Back a Business Loan if the Business Fails?

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Do You Have To Pay Back a Business Loan if the Business Fails?

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. 

What Does Defaulting on a Loan Mean?

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. 

What Happens if You Default on a Business Loan?

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.

A Personal Guarentee

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. 

What Happens if I Default on an SBA Loan?

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. 

Contact an SBA Debt Attorney at Protect Law Group

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! 

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

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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

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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

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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 personally guaranteed an SBA 504 loan balance of $337,000.  The Third Party Lender had obtained a Judgment against the clients.  We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.



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.



The client was personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture.  After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against our client’s monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars.  We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA).  As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy) but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.

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