SBA Lien Release Considerations
We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
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.
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.
Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
Client's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement. The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.
The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.
The Firm was hired to investigate and find an alternate solution to the bankruptcy option. After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.
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