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.