SBA has helped many business owners grow their business through providing funding when other lenders didn't. However, if you default on one of these types of SBA loans, you will be subject to administrative wage garnishment.
Administrative Wage Garnishment
Here are the types of SBA funding loans available to you:
These loans are the most common and known type of SBA funding. SBA 7(a) loans can be used to start a business, acquire an existing business, buying equipment and inventory, refinance existing debt, among others.
These loans offer up to $5 million in funding with a 10 to 25-year repayment. The interest rates range from 5.75% to 8.25%.
An up to 10-year repayment option applies for a working capital loan. For commercial real estate applies up to 20-year repayment option. SBA 7(a) loans may require a 10% to 20% down payment, and collateral.
SBA express loans follow the same guidelines that the SBA 7(a). But, the loan amounts for these are from $5,000 to $350,000. The interest rates on these loans range from 4.5% to 6.5% plus prime rate.
The loan terms for the SBA express loans are up to 7 years for a line of credit, up to 25 years for real estate, and from 5 to 10 years for other purposes. These loans can be used for additional working capital, cash flow, buy supplies and inventory, among others.
These loans help small businesses in disadvantaged markets to get access to funding. The amounts of SBA community advantage loans are up to $250,000 provided through community-based lenders. The interest rates on these loans are 6% plus prime rate.
The repayment terms on these loans range from up to 7 to 25 years. For working capital and startup expenses, range from up to 7 to 10 years. If the loan is for real estate, the repayment term will be for up to 25 years.
These loans are provided to startups and small businesses that don't have enough credit record to get approved for a traditional loan. These funds can be used for purchasing real estate, working capital or expanding your existing business.
SBA microloans are offered help small businesses, startups, and non-profit child-care centers with their working capital needs. These loans provide up to $50,000 in funding. These loans can be used as working capital, purchase inventory and supplies, startup capital, among others.
The interest rates on these loans range from 6.5% to 13%. The repayment term is a maximum of up to 6 years. These loans can't be used to purchase real estate or pay existing debts.
These loans are offered by the Certified Development Company (CDC) and SBA 504 program. CDC/SBA 504 loans are provided to small businesses for the construction, purchase or renovation of commercial real estate properties, and other fixed assets like equipment.
The loan amounts are up to $5.5 million. Depending on the purpose of the loan, the loan terms may be 10 or 20 years. The interest rates range from 4% to 8%.
The SBA CAPLine provides lines of credit to help small businesses their working capital needs. These may be used to cover the business's cash flow requirements, fulfilling purchase orders, renovation of commercial properties, among others.
The amounts of these lines of credit are up to $5 million, and up to $200,000 for small business asset based lines. The interest rates range from 5.75% to 8.25%. The repayment terms are for up to 5 years. You may have to provide collateral such as inventory, invoices, purchase orders, contracts, among others.
These loans are offered to small business exporters. These may help them enter new foreign markets, international transactions, and expand their exporting operations.
The amounts of these loans are from up to $500,000 and $5 million. Repayment terms on these loans are up to 3, 7, and 25 years. The 3 types of SBA export loans are SBA Export Express loans, SBA Export Working Capital loans, and SBA International Trade loans.
SBA disaster loans are offered businesses that have suffered damages or been destroyed by a declared disaster. These loans can be used as working capital, operating expenses, and to replace or repair assets like inventory, equipment, personal property, and real estate.
These loans can provide up to $2 million in funding. The interests range from 4% to 8%. Repayment terms are up to 30 years. The 3 types of SBA disaster loans are SBA Business Physical Disaster loans, SBA Economic Injury Disaster loans, and SBA Military Reservists Economic Injury loans.
If you have obtained any one of these SBA loans and have defaulted, the Department of Treasury can subject you to an administrative wage garnishment without obtaining a state court judgment first. This means the Department of Treasury can take up to 15% of each paycheck to pay down the debt.
The Debt Collection Improvement Act (DCIA) specifically states that the ability to garnish your wages through administrative wage garnishment applies notwithstanding any state law. The Supremacy Clause of the United States Constitution (Article VI, Clause 2) establishes that the Constitution, federal laws made pursuant to it, and treaties made under its authority, constitute the supreme law of the land. As such, federal law preempts state law if there is a conflict or if federal law specifically states that it preempts state law, as is the case with administrative wage garnishment. You are still entitled to due process, however, before an administrative wage garnishment can start. This means that the Department of Treasury must provide you with notice and a reasonable opportunity to be heard and present evidence in your favor before it can commence the administrative wage garnishment.
As stated in the article, you are entitled to a hearing before the Department of Treasury commences administrative wage garnishment. You have rights and you should have assertive legal representation to assert those rights. Contact us to learn more about our Administrative Wage Garnishment defense services.
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 over $150,000. Business failed and eventually shut down. SBA then pursued client for the balance. We intervened and was able to present an SBA OIC that was accepted for $30,000.
Clients personally guaranteed an SBA 504 loan balance of $337,000. The Third Party Lender had obtained a Judgment against the clients. We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
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