Is There A Way to Get Out of An SBA Loan?
Whether you have defaulted on an SBA loan or have moved on from your business partners options exist for eliminating your debt.
Are you ready to apply for a business loan for your company? Review our need to know business terms so you know what you are getting out of your loan.
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Do you know that a large number of loan applicants sign the paperwork without understanding the business terms?
Before you submit your business loan application form, read this guide to understand the common terms used by lenders. It’ll help you apply for the best business loan and understand the lingo used by most lenders
Interestingly, business loans can stretch for a few weeks to 25 years. In this industry, the word "terms" ordinarily alludes to the amount of time taken to reimburse the loan and interest to the lender.
Let me take you via some of the details of the loan terms and terminologies. They’ll help you know what you’re getting into when applying for a loan.
Behind SBA loans, these loans range from 3 to 10 years and come with the longest finance terms. They’re not easy to qualify and are not accessed by most small business owners.
These provides the longest loan terms in the business market. Loan terms in this category depend on the SBA loan programs they are lent through. Below are the three familiar SBA loan programs:
Similarly, this is another type of funding that provides prolonged business loan terms and covers one to five years. However, despite being applied via optional lenders, medium-term loans function like traditional bank loans. Their loan term provides a longer repayment period as compared to several other online business credit alternatives.
Do you know invoice financing provides extremely short-term solutions to business people? Its finance terms cover 3 to 6 months, and outstanding invoices secure the funding.
Usually, the loan term is determined by the amount of time taken by the customer to fulfill the invoice. As a result, invoice financing firms accept three to six weeks of outstanding invoices.
As the name implies, these range from 3 to 18 months. You’ll have a lower cost of capital and provides small amounts of loans that are quicker time-to-fund. Short-term loans are impacted by the year or less repayment term.
This can be medium-term or short-term in nature. Hence, the usual loan term you see attached to credit business line varies broadly from 6 months to 5 years.
Are you aware that the equipment bought with this funding secures equipment financing? Also, its common finance terms usually are longer.
The built-in collateral means: lenders take less risk — the loan covers from 2 to 5 years.
These have no business loan terms. They are repaid via a day-to-day percentage of the business card revenues. The advance firm claims the daily percentage until the whole debt is cleared.
With the fluctuating daily payment, it’s hard to tell the period taken by the merchant cash advance. But do you know this has some of the shortest loan terms in the industry?
That’s due to the daily payments. Normally, borrowers repay their loan for a period of 4 to 18 months.
During the process of searching for the right business loan, you’ll come across some terminologies as highlighted below.
This takes note of the entire cash inflows and outflows from your business during a specific period.
It’s a pre-determined time after the due date of loan payment given without incurring late charges.
Moreover, the type of business entity constitutes the category your business falls legally. Entity type influences how your business functions under the law.
Do you know with collateral you have high chances of qualifying for funding and get better business loan terms?
Collateral consists of tangible and intangible property owned by an individual or business. It may include financial accounts, equipment, vehicles, real estate, etc. Businesses use collateral in two ways:
When utilized in the business loan term, it refers to loans with no collateral backing. However, unsecured debt results in bigger risks to the lender. They’re also not easy to qualify.
By underwriting your application, the lender accesses the risk of loaning you. It involves the decisions of whether to lend or not.
Commonly known as "current liability", accounts payable constitutes a business loan term that alludes to short-term debt that you’re needed to clear soon. It denotes what’s owned by your business.
This refers to the reimbursements you’re owned. They make up outstanding invoices and allude to what your trade is owed.
In business finance terms, it refers to how borrowers pay off their business loans. For amortized loans, borrowers make scheduled and equal payments until the principal and interest is paid.
Consolidating your debts means paying multiple loans with the money you got from a single loan.
Debt financing means way of business financing or a loan that necessitates you to repay the principal amount and interest over time.
It’s a contract signed when you agree to take the loan. The loan agreement delineates the loan terms.
A loan matures after making the last loan payment. That’s after full clearing of the principal and interest.
Unlike a fixed interest rate, this differs from the market interest rates during the business loan span.
It’s a borrower who is termed as a higher risk.
Signing to a blanket lien loan gives powers to the lender to seize any of your business property if the debt is not cleared.
Refinancing your debt involves paying off your loan with another better loan. It saves your huge business cash with the avoided interest.
What do you know about working capital? It’s the entire capital utilized in day-to-day transactions in your business. It's the amount of cash in your business minus the expenses.
If you are seeking to work out or modify your SBA loan with lenders, get in touch with us. We’ll walk you through common business terms.
In the business arena, we’ll get the world at your fingertips as we offer you the most important loan details.
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 borrowed and personally guaranteed an SBA 7(a) 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.
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.
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.
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