Importance of Having Experienced Legal Representation
Having experienced legal representation is essential when it comes to settling your SBA debt. Contact Protect Law Group in Carlsbad, CA today!
While the U.S. transitions from summer to fall in the wake of the Presidential Election on November 3, 2020 against the backdrop of surging COVID-19 cases, it is very possible that a good chunk of small businesses will eventually close their doors despite having received federal stimulus help through SBA PPP loans or SBA EIDL loans.
When confronted with the prospect of having to shut down their small business, what can small business owners expect if the federal government comes knocking for repayment of any PPP loan funds that have not been forgiven in accordance with the SBA CARES Act?
According to public statistics, 172,786 jobs were saved as a direct result of the SBA PPP loan program. However, some small businesses still had to close their doors permanently.
According to public sources, approximately 140,000 small businesses remain closed due to the COVID-19 pandemic and 41% have shuttered permanently.
Public resources state that among those with the highest rate of permanent closures are shopping and retail (9,682 businesses), restaurants (12,709 businesses), beauty (3,683 businesses) and fitness (1,453 businesses).
As a result of the alarming number of permanent closures, many folks are wondering what happens when a small business PPP recipient closes permanently.
Despite the need for more guidance from the federal government, we know that if SBA PPP Loan recipients spent all of the money within eight weeks (or twenty-four weeks for those who received an extension after the PPP Flexibility Act was adopted) and they used at least 60% on payroll, then arguably their SBA PPP loan should be completely forgiven.
However, if small business recipients have unused SBA PPP Loan fund which they cannot pay off, they may need to consider the following options: (1) Submit a formal offer in compromise of the outstanding SBA PPP Loan or (2) File for federal bankruptcy protection.
According to Sharon King, the Boulder Small Business Development Center executive director, "Most or all of the loan is likely to be discharged as part of the process as long as the borrower has acted in good faith." However, it is still unclear on what would happen in this situation.
If the small business misused its SBA PPP Loan funds and then closed permanently, the SBA and Treasury have indicated their intent to follow the money by launching investigation measures and pursuing small businesses and the respective owners through various administrative and litigation tactics.
The SBA intends to provide additional guidance on PPP loan forgiveness. Once more guidance is issued, the industry should have a better idea of how the SBA PPP loans to permanently closed businesses will be managed.
Protect Law Group has proven, nationwide experience resolving SBA loan or debt cases.
Owe more than $30,000? Contact Protect Law Group for a Case Evaluation or call us toll-free at 1-888-756-9969.
We can analyze your SBA debt or Treasury problems and advise you on potential solutions.
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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
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 personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
Our firm successfully resolved an SBA COVID-19 Economic Injury Disaster Loan (EIDL) default in the amount of $150,000 on behalf of Illinois-based client. After the business permanently closed due to the economic impacts of the pandemic, the owners faced potential personal liability if the business collateral was not liquidated properly under the SBA Security Agreement.
We guided the client through the SBA’s Business Closure Review process, prepared a comprehensive financial submission, and negotiated directly with the SBA to release the collateral securing the loan. The borrower satisfied their collateral obligations with a payment of $2,075, resolving the SBA’s security interest.
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.
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