How to Avoid Defaulting on Your SBA Loan Payment
Are you worried about getting an SBA loan because you're afraid of defaulting? Click here to learn how you can avoid defaulting on your SBA loan payment.
Need help with paperwork? Get your financial ducks in a row with this guide to help you fill out your SBA personal financial statement.
Book a Consultation CallSBA Personal Financial Statement
It is a myth that the SBA offers loans for entrepreneurs to start or grow a business. To the contrary, when you apply for an SBA loan, your application goes through a bank or other approved lender.
The SBA then serves as a guarantor for loans approved through its programs. As such, a guarantor promises to pay back part of the debt in the event of default.
To make sure you can afford to repay the debt, you must include an SBA personal financial statement. therefore, use the guide below to loan officers you are ready to accept a loan for your business.
Not everyone should submit a personal financial statement within a company. However, when filling out a personal financial statement for 8(a) and 7(a)/504 loans, the amount of equity you hold in the company determines whether you submit a personal financial statement.
With 7(a)/504 loans, owners with more than 20% equity must provide an SBA personal financial statement.
Owners are also called proprietors, general partners, or managing members of an LLC. Furthermore, spouses and children with more than 20% equity must submit personal financial statements. Moreover, this is true even if they are not involved with the day-to-day business operations.
If you file a joint tax return, your spouse should submit a personal financial statement. However, your spouse may not become a guarantor on the loan depending on the circumstances. You are disclosing to the SBA that you have joint assets and liabilities.
The 8(a) loan is for individuals claiming economic disadvantage. Submit a financial statement if you own more than 10% equity in the business. However, in the event of legal separation from a spouse, split your assets and liabilities.
Get organized before beginning your application by gathering the following financial documents:
All statements must show an account number, payment amount, and current balance. For quarterly statements, use your last published statement to get the most current information.
The assets section of the personal financial statement is for all forms of income. Below is an explanation of each section listed:
Cash on hand and in banks - provide the current balance in your checking accounts.
Savings account - Provide current cash balance in all savings accounts.
IRA or other retirement accounts - Enter the current value of your retirement accounts including Deferred Compensation.
Accounts and notes receivable - Enter the total value of all money owed to you, if any. If you’ve loaned any of your personal money to the business, include this amount in the total.
Life insurance - Enter the cash surrender value of any life insurance policies. This is not the total policy value.
Real estate - Enter the current fair market value of any real estate you own.
Automobile - Enter the current fair market value of all vehicles owned.
Other personal property – Add items that have cash value like collectibles and art.
Ownership interest in firm - Enter the current fair market value of your equity in the business. If you have ownership in other businesses, include the equity value here.
Other assets - If you own any other assets not listed on this form, enter the total current value of those assets here.
Liabilities include expenses and debt. Use the information below to calculate totals for each section:
Accounts payable - Enter the total value of personal unpaid account e.g. utility bills, phone bills, childcare, etc.
Notes payable to bank and others - Enter repayment amounts for personal loans made to you from individuals, financial institutions or from your current business.
Loans on life insurance - Enter the total value of all loans currently due on Life Insurance Policies, if any.
Mortgages on real estate - Enter the total value due on all real estate related mortgage(s).
Unpaid taxes - Enter the total amount of all unpaid taxes.
Other liabilities - Enter the total value of liabilities not listed in the sections above but that are currently due.
Equity in primary residence - Enter the difference between the present market value of your primary residence and your current mortgage balance.
Total liabilities - Calculate the total of all listed liabilities.
Net Worth - Calculate your net worth by subtracting your "Total Liabilities" from your "Total Assets." Show negative net worth using parentheses.
This section is a summary of all sources of income including current employment, salary from business and investment income.
Enter the name and address of individuals and financial institutions where you owe money. The totals entered should match the amount listed in the “Notes Payable to Banks and Others” in the Liabilities section.
Enter the number of shares, the name of securities, and the date of fair market value for any public shares of stock and bonds you currently hold. This does not include membership interest in the business applying for the SBA loan.
Starting with your primary residence, detail all real estate owned using your most current mortgage statements as a reference. All values should match the total amount listed in the Real Estate section in the Assets column.
These sections offer the opportunity to explain special situations surrounding any debt or liabilities. When explaining your circumstances, always use exact amounts and dates of correspondence.
Accuracy is more important than speed when completing an SBA personal financial statement. The SBA needs to analyze your current financial situation because they become responsible for part of the loan.
Borrowing more than you can comfortably afford can lead to default. Check out our website for more information on managing an SBA loan default.
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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
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 an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
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.
Our firm successfully resolved an SBA COVID-19 Economic Injury Disaster Loan (EIDL) in the original amount of $150,000 for a Florida-based borrower. The loan, issued on June 4, 2020, was secured by business assets and potential personal liability through the SBA's Security Agreement.
Following the permanent closure of the business, we guided the client through the SBA’s Business Closure Review process and prepared a comprehensive collateral analysis. We negotiated directly with the SBA, obtaining a full release of the business collateral for $2,910 — satisfying the borrower’s obligations under the Security Agreement and eliminating any further enforcement risk against the pledged assets.
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