SBA Loan Default: Is Your Loan Substandard?
We provide borrowers facing an SBA loan default with solutions. We identify your SBA loan problems and provide solutions, like an SBA offer in compromise.
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.
Clients personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
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.
Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral. One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.
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