SBA Loans Explained - The 7(a) Loan
If you obtain an SBA loan - specifically a 7(a) loan, you can use the loan proceeds to help finance a great variety of business expenses.
When a business is no longer sustainable and has debts it cannot fulfill, it may need help closing down as it cannot simply shut down and ignore the debts. If the business owner obtained an SBA loan for their business, they may receive an SBA demand letter asking for the amount paid in full. If the business owner cannot pay in full in a reasonable amount of time, they may want to look into an Offer in Compromise.
There are only certain circumstances in which an SBA Offer in Compromise will work. If the borrower is unable to make the full payment and the business has ceased with all assets liquidated, it might be possible for them to work out an Offer in Compromise with the SBA. However, this is not as simple as the remaining debt is forgiven and there are no other repercussions. It's always recommended for the business owner to speak with a tax advisor or a legal advisor before beginning something like this as it might not be the right path for them to take.
When a business owner is facing an SBA loan default or an SBA loan foreclosure, speaking with a lawyer can help them determine what all of their options are. If there are enough assets to pay off at least most of the business debts, they might be able to pay off the remainder over time and not be able to go through the Offer in Compromise. The lawyer will closely look at the business assets, debts, and other finances to see what the right steps to take will be for that particular business. The lawyer may also be able to look into other help for the business owner, like a Tax Offset Program, to help them fulfill all of the debts and finish closing the business properly.
Choosing to do an Offer in Compromise depends on quite a few factors surrounding the business's current financial situation and can be a good idea for some businesses. A business owner will want to speak with a lawyer to find out if it's the right step for their business or if there's an option that might be better for them. If you're closing a business and not sure how to handle your debts or are worried about an Offer in Compromise, contact a lawyer today for help.
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 for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
The client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. The client received the SBA's Official 60-day notice with the debt scheduled for referral to the Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-day notice, and prevent enforced collection by the Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.
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