If you Owe more than $30,000 contact us for a case evaluation at (833) 428-0937
contact us for a free case evaluation at (833) 428-0937
Call us (833) 428-0937

SBA Loan Default: Is Your Loan Substandard?

We provide borrowers facing an SBA loan default with solutions. We identify your SBA loan problems and provide solutions, like an SBA offer in compromise.

Book a Consultation Call

SBA Loan Default: Is Your Loan Substandard?

We provide individuals who are facing an SBA loan default with solutions. We will help you understand different SBA loan problems and will provide you with solutions such as an SBA offer in compromise.

Dealing with the idea that you might be facing SBA loan default can be terrifying. The SBA attorneys in our office are skilled at helping clients understand all of the facets of their situations. If, for instance, you need to know what an SBA offer in compromise is, you can simply ask your lawyer. You should never face 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. We urge you to read about the services that we have available and to contact us if you believe that we can be of assistance to you right now.

Your may be in danger of defaulting on your SBA loan when certain warning signs arise.  The SBA will be looking at a checklist of items to determine if loan will be classified as "substandard".

Early financial warning signs include:

Balance Sheet

  • Failure to submit financial statements in a timely fashion
  • Slowdown in the collection period for receivables
  • Deterioration in customer’s cash position
  • Share increases in dollar amounts or percentage of accounts receivable
  • Share increases in dollar amounts or percentage of inventory
  • Slowdown in inventory turnover
  • Decline in current assets as a percentage of total assets
  • Deterioration of the liquidity/working capital position Marked changes in mix of trading assets
  • Rapidly changing concentrations in fixed assets
  • Large increase in reverses
  • Concentrations in noncurrent assets, other than fixed assets
  • High concentration of assets in intangibles
  • Disproportionate increases in current debt Substantial increases in long-term debt
  • Low equity relative to debt
  • Significant changes in the structure of balance sheet
  • Presence of debt due to/from officer/shareholders
  • Qualified audit
  • Change of accountants

Income Statement

  • Declining sales/rapidly expanding sales
  • Major gap between gross and net sales
  • Rising cost percentages/narrowing margins
  • Rising sales and falling profits
  • Rising levels of bad debt losses
  • Disproportionate increases in overhead, relative to sales
  • Rising levels of total assets, relative to sales/profits
  • Operating losses

Receivables Aging

  • Extended average age of receivables
  • Changes in credit policies
  • Extended terms
  • Replacement of accounts receivable with notes receivable
  • Concentrations of sales
  • Compromise of accounts receivable
  • Receivables from affiliated companies

Early Management Warning Signals

  • Change in behavior/personal habits of key people
  • Marital problems
  • Change in attitude toward bank or banker, especially a seeming lack of cooperation
  • Failure to perform personal obligations
  • Changes in management, ownership, or key personnel
  • Illness or death of key personnel
  • Inability to meet commitments on schedule
  • Recurrence of problems presumed to have been solved
  • Inability to plan
  • Poor financial reporting and controls
  • Fragmented functions
  • Venturing into acquisitions, new business, new geographic area, or new product line
  • Desire and insistence to take business gambles and undue risk
  • Unrealistic pricing of goods and services
  • Neglect or discontinuance of profitable standard lines
  • Delay in reacting to declining markets or economic conditions
  • Lack of visible management succession
  • One-person operations showing growth patterns that strain the capacity of the owner to manage and control
  • Change in business, economy, or industry
  • Labor problems
  • Change in the nature of the company’s business
  • Poor financial records and operating controls
  • Inefficient layout of plant and equipment
  • Poor use of people
  • Loss of key product lines, franchises, distribution rights, or sources

    of supply
  • Loss of one or more major, financially secure customers
  • Substantial jumps in size of single orders or contracts that would

    strain existing productive capacity
  • Speculative inventory purchases that are out of line with normal purchasing practices
  • Poor maintenance of plant and equipment
  • Deferred replacement of outmoded or inefficient equipment
  • Evidence of stale inventory, large levels of inventory, or inappropriate mix of inventory

Contact us today at 1-888-756-9969 for a FREE case evaluation.

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

construction accident injury lawyer

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

slip and fall attorney

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

truck accident injury attorney

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.

$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

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.

$975,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

$975,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.

The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.

Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.

$391,000 SBA COVID EIDL - CROSS-SERVICING DISPUTE | NEGOTIATED REINSTATEMENT & WORKOUT

$391,000 SBA COVID EIDL - CROSS-SERVICING DISPUTE | NEGOTIATED REINSTATEMENT & WORKOUT

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.

Read more Case Results

Related Content

Read more sba debt articles