We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
Book a Consultation CallDealing with the idea that you might be facing an SBA loan default can be terrifying. The SBA attorneys in our office are skilled at helping clients understand all the facets of their situation. We will advise you as to the potential for an SBA offer in compromise. You should never face your SBA loan problems alone. It is important to retain the services of an attorney who can help you through this difficult time in your life. Please contact us for a free initial consultation.
In the event that a borrower defaults, the lender has the option to receive from SBA the face value of the outstanding guaranteed balance.9 Proceeds from the liquidation
of a firm’s assets and any subsequent recoveries are then split in proportion to the guarantee percentage. (For example, if the SBA guarantees 70 percent of the loan, it
has claim to 70 percent of recoveries.)
In the Express program, unlike regular 7(a) loans, a borrower’s assets are generally liquidated upon default and before lenders submit the loan to SBA. The lender receives all proceeds from liquidation of the borrower’s assets, and any subsequent recoveries after the lender submits the loan to SBA are split between SBA and the lender according to the guarantee percentage.
For example, assume that a borrower who has a loan with a $100,000 balance and a 50 percent guarantee defaults and that the borrower’s assets are worth $60,000. In the regular 7(a) program, the lender submits the defaulted loan to SBA and receives $50,000 (the guaranteed portion of the loan balance). When the borrower’s assets are later liquidated, the lender and SBA each receive 50 percent of the assets, or $30,000. The net loss to SBA is $20,000 (the $50,000 payment to the lender minus the $30,000 recovered from the borrower’s assets), and the net loss to the lender is also $20,000 (the $100,000 loan balance minus the $50,000 received from SBA and the $30,000 recovered from the borrower’s assets).
If the loan was made through the Express program, the lender liquidates the borrower’s assets (worth $60,000) and then submits the remaining loan balance of $40,000 to SBA. The lender then receives $20,000 (the guaranteed portion of the loan balance) from SBA. The net loss to SBA is $20,000, and the net loss to the lender is also $20,000. If an additional $1,000 is later recovered, the lender and SBA would each receive $500.
If you are facing an SBA loan default, contact us today for a FREE initial consultation at 1-888-756-9969 or contact us below:
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's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement. The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.
The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.
The Firm was hired to investigate and find an alternate solution to the bankruptcy option. After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.
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.
Client personally guaranteed SBA 7(a) loan balance of over $150,000. Business failed and eventually shut down. SBA then pursued client for the balance. We intervened and was able to present an SBA OIC that was accepted for $30,000.
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