Local Relationships Result in Lower SBA Loan Default Rates
We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
The SBA guaranty
The federal government’s guaranty is considered the most important collateral for an SBA loan. This is especially true for any SBA 7(a) loan. The Third Party Lender’s ability to collect on an SBA guaranty, however, is not absolute.
The SBA has established written procedures for liquidating loans. They are detailed, complex and also very cumbersome. For example, SBA’s regulations dictate that third party lenders obtain the SBA’s written approval before they take certain liquidation actions, and that the third party lender notify the SBA in advance of its intention to pursue certain other liquidation and/or collection actions.
In addition, SBA regulations also require third party lenders to take certain actions that they ordinarily would not take on their own conventional loan portfolios, particularly where one of the SBA loan obligors files for bankruptcy or dies. Finally, even if a third party lender makes all of the right decisions and selects the appropriate course of action, it may not document its action sufficiently in accordance with the SBA’s requirements.
As such, when it comes time for the third party lenders to enforce their rights under an SBA loan but makes a mistake or fails to act in strict compliance with the applicable SBA regulations, the SBA may limit its obligation to reimburse the third party lender for liquidation costs, may reduce the amount of the SBA guaranty, or may even refuse to honor the guaranty outright.
Moreover, because the guaranty purchase is the last step in the SBA loan liquidation process, third party lenders typically do not discover a costly mistake until it is too late to correct the problem. In too many cases, a lender’s errors do not come to light until the SBA denies a guaranty purchase request or penalizes the lender with a reduction in its guarantee.
When certain irregularities associated with an SBA guaranty purchase are discovered, it may provide federal SBA debtors additional ammunition to contest the validity or enforceability of subject SBA debt. The argument is that the SBA should not have honored or purchased the guaranty presented by the third party lender insofar as the third party lender did not strictly comply with specific written SBA regulations. Had the SBA knew or should have known of the third party lender’s non-compliance, the SBA guaranty would have either been denied or, at the very least reduced. This fact, alone, had it been discovered, would then call into question the validity and/or enforceability of the SBA debt as it relates to the federal SBA debtor.
Therefore, it is extremely imperative for SBA loan obligors or guarantors to consider, at the outset, whether the federal SBA debt is even enforceable against them – notwithstanding the existence of a signed promissory note or personal guarantee – as those initial documents preceded the transactions involving the SBA guaranty and assignment of the collection rights regarding the SBA loan from the original third party lender to the SBA or Treasury.
LIABILITY INVESTIGATION
Protect Law Group’s SBA Attorneys and United States Treasury Dept. Practitioners offer SBA debtors the rarest of commodities: highly skilled federal administrative law practitioners who are well-versed in SBA’s regulations.
Our SBA & DOT Practitioners look at all angles of defending, appealing and settling SBA debts. They recognize that it is important to uncover certain irregularities in an attempt to negotiate an SBA OIC or DOT compromise based on the applicable findings. To do so, they try to look for certain guaranty purchase issues and violations of applicable SBA regulations that may have occurred but went unnoticed by the SBA during the liquidation process. If discovered, then the next strategic endeavor is to call into question the actual validity or enforceability of the SBA debt as against the SBA debtors or obligors.
If you are struggling with circumstances that involve SBA loan default or DOT collection action, you deserve professional help! Our attorneys know how to settle SBA OIC and DOT compromise cases. If you contact us, we can help you settle SBA debt once and for all. After you schedule an appointment, you confer with a dedicated SBA OIC and DOT Practitioner who helps you through your administrative legal battle. After your claim is resolved, you never again have to worry about your SBA loan default or DOT collection problem haunting you. Our team of lawyers has assisted many clients through the years. Now it is your turn! You truly can settle SBA debt for good!
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 $150,000. COVID-19 caused the business to fail, and the loan went into default with a balance of $133,000. Client initially hired a non-attorney consultant to negotiate an OIC. The SBA summarily rejected the ineligible OIC and the debt was referred to Treasury’sBureau of Fiscal Service for enforced collection in the debt amount of $195,000. We were hired to intervene and initiated discovery for SBA and Fiscal Service records. We were able to recall the case from Fiscal Service back to the SBA. We then negotiated a structured workout with favorable terms that saves the client approximately $198,000 over the agreed-upon workout term by waiving contractual and statutory administrative fees, collection costs, penalties, and interest.
Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency. After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.
Client’s small business obtained an SBA 7(a) loan for $150,000. He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made. The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.
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