SBA Loan Default: What Happens if You Don't Pay?
Did you default on an SBA loan? We're telling you what happens if you don't pay and what you can do with an SBA loan default.
SBA COVID-19 PPP and EIDL Loans: SBA Ramps Up Audits and Investigations
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On August 5, 2025, federal prosecutors unsealed an indictment charging small business owner, Jabari Kadar Long, with conspiracy, wire fraud affecting a financial institution, and money laundering tied to fraudulent Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL)applications. Authorities allege Long and unnamed co-conspirators siphoned more than $3 million in COVID-relief funds by inflating payroll figures and the number of employees for his small business, “Priceless Preservations Construction.” Source:(Department of Justice)
The defendant is presumed innocent, yet his case adds to a growing wave of COVID-relief prosecutions—and a clear message from the Department of Justice (DOJ) that it intends to investigate, find and prosecute fraudulent borrowers and guarantors well into 2026 and beyond.
Our seasoned SBA Attorneys blend white-collar defense experience with knowledge of Paycheck Protection Program compliance, COVID EIDL regulations, and SBA administrative procedures. Whether you face a COVID EIDL Business Closure Review, an OHA case, or need a proactive compliance check-up, we marshal document reviews, conduct legal research and outline settlement strategies to protect your business and personal assets.
The Long indictment shows that “self-certified” COVID-relief loans are under a microscope—and mistakes can morph into criminal accusations of SBA loan fraud. Don’t wait for an information document request, an FBI target letter or federal subpoena to get your house in order. Schedule a confidential strategy session with our SBA loan defense team today to safeguard the future you worked so hard to build.
If you receive a “business closure review,” “post-funding compliance review,” or any sudden SBA document request:
Contact experienced SBA loan defense attorney immediately.
Our SBA Attorneys have guided thousands of small businesses through reviews, contested or negotiated debts assessed against owners, officers and guarantors, and litigated cases at the SBA Office of Hearings & Appeals (OHA) Court before presiding Administrative Law Judges (ALJs).
Schedule a confidential strategy session today → keep your success story from becoming the next SBA nightmare tale. If you believe your SBA COVID PPP or EIDL loan could be targeted for enforced collection, business closure review, audit, investigation or an AFCA claim, contact us at SBA-Attorneys.com for a confidential Case Evaluation.
This article is provided for informational purposes only and does not constitute legal advice. Consult a qualified SBA-Attorney for advice regarding your individual situation.
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 personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
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.
Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
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