For Your Business: Should You Consider Small Loans from the SBA?
The SBA can help advance such entrepreneurs small loans to give their firms a chance at thriving again. But you will have to sign a personal guarantee.
When faced with overwhelming debt and struggling to meet loan obligations, entrepreneurs often find themselves seeking alternatives to manage their financial burdens. One potential solution that may provide relief is an SBA (Small Business
Book a Consultation CallIn the world of small business, financial challenges can arise unexpectedly. When faced with overwhelming debt and struggling to meet loan obligations, entrepreneurs often find themselves seeking alternatives to manage their financial burdens. One potential solution that may provide relief is an SBA (Small Business Administration) Offer in Compromise. This article delves into the intricacies of this option and explores whether it is the right path for you.
When considering the possibility of an SBA Offer in Compromise, it's crucial to evaluate the benefits and drawbacks it entails. This section examines the various aspects of this option to help you determine if it aligns with your business needs and financial situation.
The SBA Offer in Compromise is a program designed to assist small business owners burdened by substantial debt. It offers a potential resolution by allowing eligible personal guarantors to settle their debts for less than the total amount owed. By negotiating with the SBA, entrepreneurs can reduce their financial obligations and regain control of their finances.
Not all personal guarantors qualify for an SBA Offer in Compromise. Meeting the eligibility requirements is essential to determine if this alternative is suitable for your specific circumstances. The following criteria must generally be met:
1. Demonstrating financial hardship: To be considered for an SBA Offer in Compromise, you must prove that paying off the debt in full would cause significant financial hardship.
2. Inability to repay the loan: You need to demonstrate that you lack the financial capacity to fulfill its loan obligations due to ongoing financial challenges.
3. Good faith effort: The SBA expects you to make a genuine effort to repay the debt before considering an offer in compromise. This can involve exploring other repayment options, such as loan modifications or debt restructuring. That is, did you help maximize recovery on the loan?
1. Debt reduction: The primary benefit of an SBA Offer in Compromise is the opportunity to reduce your overall debt burden. By negotiating with the SBA, you may be able to settle your debts for an amount significantly lower than what you owe.
2. Financial relief: If you are struggling financially and unable to meet loan payments, an SBA Offer in Compromise can provide much-needed relief. It allows you to regain control of your finances and focus on reviving your business.
3. Avoiding bankruptcy: For many entrepreneurs, the thought of filing for bankruptcy is distressing. An SBA Offer in Compromise provides an alternative to bankruptcy, allowing you to resolve your debt issues while avoiding the severe consequences associated with bankruptcy proceedings.
1. Impact on credit score: While an SBA Offer in Compromise can alleviate financial burdens, it may have a negative impact on your credit score. It is crucial to consider the long-term implications and potential challenges of obtaining credit in the future.
2. Eligibility criteria and approval process: The eligibility requirements for an SBA Offer in Compromise can be stringent, and the approval process may be complex and time-consuming. It is essential to prepare a strong case and meet all the necessary documentation requirements.
Yes, negotiation is a fundamental aspect of the SBA Offer in Compromise. The program allows you to present your case and propose an offer to settle your debts. However, it is essential to understand that the SBA has the final say in approving or rejecting the offer.
While an SBA Offer in Compromise can significantly reduce your debt, it does not guarantee complete elimination. The SBA will assess your financial situation and make a determination based on your ability to repay as well as other factors.
Typically, if you have already filed for bankruptcy, you may not be eligible for an SBA Offer in Compromise if the debt was already discharged. It is crucial to consult with legal and financial experts to explore the options available to you based on your specific circumstances.
The timeline for the SBA Offer in Compromise process can vary depending on several factors, such as the complexity of your case and the backlog of applications. It is advisable to consult with an SBA expert to get a better understanding of the expected timeline.
If your SBA Offer in Compromise is rejected, you have the option to file a motion for reconsideration. It is crucial to thoroughly review the reasons for rejection and work with professionals to strengthen your case during the appeal process.
If your SBA Offer in Compromise is approved, you will be required to fulfill the agreed-upon terms, which may involve making a lump sum payment or adhering to a structured repayment plan. Once you have satisfied these obligations, your debts will be considered resolved.
Navigating the challenges of financial distress as a small business owner can be overwhelming. Exploring alternatives like the SBA Offer in Compromise can provide a viable path towards regaining financial stability. By understanding the eligibility criteria, benefits, and drawbacks associated with this option, you can make an informed decision that aligns with your business's needs and goals.
Please contact us to set up a case evaluation and consultation.
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 personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
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.
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.
.jpg)
