As a responsible party (stemming from an SBA Note or SBA Unconditional Guarantee) for an SBA loan default or SBA debt that has been transferred to the Treasury’s Bureau of Fiscal Service, you may want to consider challenging your liability for the alleged debt by investigating whether the original seller of the small business that you purchased (through an SBA-guaranteed loan) may have engaged in fraud or misrepresentation in the sale and purchase of the subject small business based on inflated or fraudulent financials.
Case in Point: U.S. v. Rood
Todd E. Rood was the owner of Rood Machine & Engineering when he falsified documents in 2015 and 2016 to make his business look more attractive than it actually was. By altering his business’s bookkeeping records, Rood inflated its income by approximately $583,827 and lowered its liabilities by reclassifying them.
Rood, who pleaded guilty to SBA loan application fraud, admitted making false statements to the buyers’ bank in order to defraud the buyers and their financial institution – which was a participating SBA lender. The loss to the SBA lender and the small business buyers amounted to approximately $1,347,608.
Rood’s company was purchased for $2.05 million based on the fraudulent financial documents. A $1.74 million loan used to purchase the small business was guaranteed by the Small Business Administration (SBA).
According to court documents, the buyers of Rood’s small business also undertook a "quick sale" of their home in order to buy Rood Machine & Engineering on the timetable set forth by Rood, who falsely claimed to have terminal colon cancer. The buyers incurred a loss of $40,000 on their home as a result.
Under the terms of his plea agreement, Rood must pay the company's buyers $262,000 in restitution for their closing costs as well as a required cash infusion into the business.
Rood was sentenced to four years in a federal prison without parole. Rood also has been ordered by the federal court to pay $1,347,608 in restitution and a money judgment to the government of $1,207,979, which covers his profit from the sale.
To view a copy of Rood’s Plea Agreement, click here
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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.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $140,000 on behalf of a husband-and-wife guarantor pair. The business had closed following a prolonged decline in revenue, leaving the borrowers personally liable for the remaining balance.
After conducting a comprehensive financial analysis and preparing a detailed SBA Offer in Compromise (SBA OIC) package, we negotiated directly with the SBA and the lender to achieve a settlement for $70,000 — just 50% of the outstanding balance. This settlement released the borrowers from further personal liability and allowed them to move forward without the threat of enforced collection.
Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
Our firm successfully facilitated the SBA settlement of a COVID-19 Economic Injury Disaster Loan (EIDL) where borrower received an SBA disaster loan of $150,000, but due to the severe economic impact of the COVID-19 pandemic, the business was unable to recover.
Despite the borrower’s efforts to maintain operations, shutdowns and restrictions significantly reduced the customer base and revenue, making continued operations unsustainable. After a thorough business closure review, we negotiated with the SBA, securing a resolution where the borrower paid only $6,015 to release the collateral, with no further financial liability for the owner/officer.
This case demonstrates how businesses affected by the pandemic can navigate SBA loan settlements effectively. If your business is struggling with an SBA EIDL loan, we specialize in SBA Offer in Compromise (SBA OIC) solutions to help close outstanding debts while minimizing financial burden.
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