Businesses face enormous financial risks throughout their entire existence, but they are never more vulnerable than during their first few years or immediately following a large expansion. During these periods of change and adjustment the owners must also deal with higher costs. Much of this expense is due to the business loans, often from the Small Business Administration (SBA), that enabled them to open or expand. When everything goes as planned the books will balance and the loans are paid. Unfortunately, this is not always how it works in the business world. This leads to companies falling behind in their bills and not making their loan payments as promised.
When a loan is not paid on time there is a traditional method of collection that the lender will use. An SBA demand letter is usually sent after several missed payments and when other contact methods have failed. This letter will demand repayment of the balance of the loan because it is now considered to be in default. An SBA loan default is a serious issue because the business property and any personal belongings used as collateral are at risk. If payment is not received or an additional agreement not made once the loan is in default an SBA loan foreclosure is possible. This is the point when the SBA may seek to seize personal and business assets and levy bank accounts. The SBA may also initiate a Tax Offset Program to collect any tax refunds the borrower is due and use them to reduce the debt.
Business owners have options to prevent the loss of their property. An SBA Offer in Compromise is a plan agreed to by the borrower and the SBA where the lender accepts a payoff for the loan that is less than the full balance owed. It is a good solution for businesses that have closed and are liquidating. By using the funds received from their sold property they can potentially protect their personal property and savings from being seized. Whether this method or some other form of negotiation is used it is very important to seek the assistance of an attorney familiar with SBA loans. Small business loans offer many people the opportunity to fund their dreams, but when a business fails it is imperative that the borrower work to find a mutually acceptable compromise.
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 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.
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.
Clients obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
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