Can a Business Loan be Forgiven if the Business Fails?
Discover key factors regarding business loan repayment obligations after a business failure. Explore SBA loan forgiveness options and consult with Protect Law Group.
Looking for SBA debt relief options? Click here to find out how submitting SBA offers in compromise can reduce your non-tax debt!
Book a Consultation CallWhen you got the SBA loan, you had every intention of paying it back. Unfortunately, you are now struggling just to keep yourself and your business afloat. However, some viable options existif you need SBA debt relief.
Some of these options you may not have even heard of yet. One of them that is used with more success than not is when you submit an offer of compromise. Submitting an offer in compromise is just one way to relieve some of your ongoing business and financial pressure.
You may also negotiate with your lender so you can create a workout agreement that is better suited to your new financial circumstances. Please keep reading if you want to learn more about submitting an offer in compromise and how it can reduce your non-tax debt.
It is actually quite normal for small businesses to struggle to repay their debts. The Bureau of Labor reports that 20% fail in their first year. 50% of small businesses fail by their fifth year.
This is why the SBA approves millions of dollars in loans and guarantees each year. They want to ensure that you have every opportunity to succeed and grow. When you struggle to pay back your SBA loan, you can even seek SBA debt relief.
One option when seeking debt relief is to submit an offer in compromise to the SBA. The SBA will review your circumstances and determine if they accept or deny your offer. To help you better understand how submitting an offer of compromise can relieve some of your SBA debt, here are some strategies that explain the process.
As a personal guarantor, if your business defaults on an SBA loan you remain personally liable. The SBA offer in compromise program allows personal guarantors to pay less than the full amount of the debt to settle. However, your business must be closed to take advantage of the offer in compromise. The SBA has made exceptions, but it's a rare thing for them to do.
On top of closing your business, you need to consult with a legal representative for you to get the best shot at the SBA approving your offers in compromise program.
Your SBA Offer in Compromise Attorney can help you navigate the offer in compromise waters.
Overall your offer in compromise should be presented to the SBA in a compelling manner and be numbers-driven. The numbers must be factual and backed up by documents. The numbers also need to demonstrate to the SBA that they cannot get the loan money you owe them.
It understandable that small business owners turn to the SBA when they need to start or grow their business. But if your business begins to fail, the SBA loan debt is now an issue. Now that you're facing SBA loan debt, it is usually necessary to liquidate the business assets.
Unfortunately, the liquidation often fails to cover the balance of the loan. As such, any deficiency falls on you, the personal guarantor.
The SBA, via the Department of Treasury, could order your employer or the IRS to garnish any disposable pay to satisfy the delinquent non-tax debt you owe to the United States if you defaulted on an SBA loan. They do this through the Administrative Wage Garnishment (AWG) process. SBA debtors do have the right to have an official hearing if they receive a notice of intended AWG.
Using experienced counsel to present evidence and legal arguments in your defense will increase your chances of defeating the AWG.
The SBA loan default statute of limitations consists of the amount of time that a lender has to sue a borrower for defaulting on their loan. The law varies depending on where the borrower lives.
However, once the SBA or the Treasury service your debt, no statute of limitations exists as to administrative remedies such as administrative wage garnishment, tax refund offset or Social Security offset. A six year statute of limitations applies to the government's ability to sue you for breach of contract / guarantee. However, this only applies to filing a law suit, it does not apply to administrative remedies.
The SBA lenders can provide loan deferments to borrowers when they want to modify or suspend their payments for a time. Loan deferments can be for a little as 3 months.
SBA Attorneys range from providing SBA loan default expertise to helping you with your SBA offers in compromise.
An assertive attorney experienced in Offer in Compromise cases can help you settle an SBA loan.
Reach out to Protect Law Group. Protect Law Group can make a difference in your SBA debt relief case. Having someone dedicated to helping you settle an SBA debt relief case will help you turn the page so you can move forward with the rest of your life.
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 SBA 7(a) loan balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.
Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
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