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If you have an SBA Loan Problems, the goal is to raise defenses to the SBA Loan Agreement or Personal Guarantee Agreement

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If you have an SBA Loan Problems, the goal is to raise defenses to the SBA Loan Agreement or Personal Guarantee Agreement

You should not have to struggle with your SBA loan problems on your own. Instead, turn to one of our attorneys who specializes in SBA offer in compromise claims. We are dedicated to helping you settle SBA loan default.

If you have been deemed liable for an SBA debt due to a breach of an SBA loan agreement or personal guarantee, you need to investigate and raise all applicable affirmative defenses to the original SBA loan agreement or personal guarantee agreement you signed.

In a dispute over a breach of an SBA loan agreement or personal guarantee contract, you should raise as many legal defenses as possible, also known as "affirmative defenses." It's usually not enough to simply deny legal wrongdoing; you must respond with every possible argument that justifies your position. And, if you don't raise defenses in the early stages, you may be prevented from raising them later.

This article identifies common affirmative defenses and looks at the kinds of defenses that might be used in response to a breach of an SBA loan agreement or personal guarantee.

What Is an Affirmative Defense?

Most defenses are referred to as "affirmative defenses." As a legal matter, this means that the party raising the defense has the burden of proving the defense.  An affirmative defense does not contest the primary claims or facts (for example, that there was a breach of contract), but instead asserts mitigating facts or circumstances that render the breach claim moot. In other words, it is like saying, "Even if I breached the Agreement, the other party should not be allowed to collect any consequential damages from me for the breach." For example, let's say that Bieber, a teenage singer, fails to show up for a concert and is accused of breaching his agreement to provide entertainment services. Regardless of whether he breached the agreement, Bieber may assert the affirmative defense that he lacked the capacity to enter into the Agreement the first place because he's a minor.

Common Affirmative Defenses to a Breach of Agreement Claim

How you frame your affirmative defenses in a breach of agreement claim is limited only by your counsel's imagination (and your ability to bankroll legal fees). Some of the most common defenses are listed below:

  • The contract was supposed to be in writing. If the other side argues that an oral agreement should be enforced against you, you may be able to defend yourself by claiming that a state law (known as the "statute of frauds") requires the type of contract -- for example, for the sale of real property -- to be in writing.
  • The contract is indefinite. If the essential terms were never agreed upon, you may be able to defend by arguing that the contract is indefinite. This means either the parties did not consider the deal to be final or that a court could not discern the essentials, even by implication (for example, if it's not clear how long an agreement should last or what the specifications are for a construction project). Agreements to agree (such as letters of intent or agreements in principle) are usually considered indefinite and therefore unenforceable, although courts will require the parties to act in good faith to reach an agreement.
  • There is a mistake. You can defend yourself by proving that a mutual mistake was made as to an essential fact in the contract -- for example, both parties were mistaken as to the authenticity of a painting. You cannot use this defense when referring to a mistake in judgment by one party ("Oops, I could have gotten so much more for my painting!")
  • You lacked capacity to enter into an Agreement. If you lacked capacity (that is, you couldn't understand what you were doing when you entered into the deal, as discussed in the example above), the contract may be voidable. This defense is most likely to succeed in the case of minors and those with mental incapacities.
  • You were fraudulently induced to enter into the Agreement. An Agreement will be invalid if it was induced by lies, under duress ("Sign this or we'll take your cat"), or by a trusted person's undue influence (your banker advises you to sign the deal because she secretly gets a kickback from another third party).
  • The Agreement is unconscionable. An Agreement t won't be enforced if it is grossly unfair. This almost always occurs in situations where the bargaining power is severely imbalanced (as in a contract of adhesion) and the party with more power takes advantage by forcing unfair conditions, clauses, or waivers on the other party.
  • estoppel. When one party makes a statement excusing performance of the agreement and the other party relies on that statement, the first party may be prevented from later denying that statement and claiming a breach. For example, if a bank president calls a homeowner and tells her that the bank won't foreclose for six months in order to give the homeowner a chance to sell the home, the bank will be held to its six-month promise.
  • The Agreement is illegal. An Agreement is unenforceable if its object or the thing bargained for is illegal -- for example, an Agreement that enables prostitution, violates tax laws, or requires the destruction of records. Agreements that may indirectly aid illegal purposes will sometimes be enforced -- for example, an agreement to supply gambling machines, even though they may be illegal in some states, may be enforced. Sometimes, a court will sever the illegal aspect from the agreement, leaving the rest of the contract enforceable.

The Catch-All Defense: Arguing in the Alternative

If you've been deemed liable for a breach of Agreement, the law permits you to claim as many alternative defenses as you want, even if they contradict each other. For example, you may argue that the Agreement is invalid or unenforceable, that you performed as required by the Agreement, and alternatively, that your failure to perform was justified by the other party's actions -- even though those arguments can't all be true. (It's a little bit like the criminal defense attorney who argues his client was 100 miles from the scene of the murder and, alternatively, that the murder was in self-defense.) Finally, in some cases, you may admit to the breach and assert defenses only to the damages claimed by the other side.

If you are struggling with circumstances that involve SBA loan default, you deserve professional aid! Our attorneys all know how to win SBA Offer in Compromise cases. If you contact us, we help you resolve your SBA loan problems once and for all. After you schedule an appointment, you confer with a dedicated SBA Offer in Compromise lawyer and Treasury Department Practitioner who helps you through your administrative legal battle. After your claim is resolved, you never again have to worry about your SBA loan problems haunting you. Our team of lawyers has assisted many clients through the years. Now it is your turn! You truly can resolve your SBA loan problems for good!

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

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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

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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

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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 borrowed and personally guaranteed an SBA 7a loan.  Clients defaulted on the SBA loan and were sued in federal district court for breach of contract.  The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan.  We were subsequently hired to intervene and aggressively defend the lawsuit.  After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.



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.



Clients personally guaranteed SBA 7(a) loan balance of over $300,000.  Clients also pledged their home as additional collateral.  SBA OIC accepted for $87,000 with full release of lien against home.

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