FAILED SMALL BUSINESSES & LIABILITY FOR SBA PPP LOANS
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?
Small Business Statistics
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.
SBA PPP Loan Forgiveness
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.
Unused SBA PPP Loan Funds
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.
Misuse of SBA PPP Loan Funds
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.
If your Small Business is heading for closure despite receiving SBA PPP and/or SBA EIDL loans, you should seek advice of counsel to assist you with a potential resolution of your SBA loan problems.
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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$1,200,000 SBA 7A LOAN - SBA OHA LITIGATION
Client 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.
Clients personally guaranteed an SBA 7(a) loan that was referred to the Department of Treasury for collection. Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest. We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.
$375,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT
Client personally guaranteed SBA 504 loan balance of $375,000. Debt had been cross-referred to Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.
Providing real solutions to individuals who are facing SBA loan problems. Contact one of our experienced SBA Attorneys and Federal Agency Practitioners today for a Free Case Evaluation - (833) 428-0937.