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.
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.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
Client personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture. After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against his monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars. We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA). As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy) but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.
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